RBI Proposes Strict Guidelines to Combat Mis-Selling in Financial Sector
The Reserve Bank of India (RBI) has unveiled draft guidelines aimed at curbing mis-selling practices by banks and other regulated entities. These proposals, released on Wednesday, emphasize customer protection through explicit consent requirements, mandatory compensation for losses, and a ban on deceptive marketing tactics known as dark patterns.
Key Provisions of the Draft Guidelines
Under the new framework, regulated entities must obtain explicit customer consent before offering any financial products or services. In cases where mis-selling is established, lenders are required to refund the entire amount to customers and compensate them for any incurred losses. The guidelines also introduce comprehensive norms for advertising, marketing, and sales, covering both proprietary and third-party financial offerings.
Ban on Dark Patterns and Deceptive Practices
A significant aspect of the draft is the prohibition of dark patterns—deceptive design elements in user interfaces that mislead or pressure users into immediate purchases. The RBI mandates that banks ensure their interfaces do not employ such tactics and undergo regular user testing and internal audits to identify unfair features. This move aims to prevent coercion and create a more transparent customer experience.
Policy Requirements for Lenders
Lenders must implement a detailed policy for advertising and sales, ensuring it does not incentivize mis-selling or encourage employees and direct selling agents to push products aggressively. The guidelines explicitly state that no incentives should be received by staff from third parties for selling their products. Additionally, bundling third-party products with own offerings is restricted, giving customers the option to purchase from alternative sources if necessary.
Implementation and Public Feedback
The RBI has opened these draft proposals for public comments, with the final directions set to take effect from July 1, 2026. This initiative reflects the central bank's commitment to fostering responsible business conduct and enhancing trust in the financial system. By addressing issues like unauthorized loan funding and unfair sales practices, the guidelines aim to safeguard consumer interests and promote ethical standards across the industry.
