‘No consent…’: RBI tightens mis-selling rules for banks, influencers | How to protect yourself from misleading products

The Reserve Bank of India (RBI) on Monday issued stricter norms to prevent banks and other financial institutions from mis-selling financial product. The revised rules, which will come into effect from January 1, 2027

Under the new norms, banks cannot design incentive structures that encourage employees or agents to aggressively sell products.

The revised rules also applies to social media influencers and digital marketing partners hired by banks and financial institutions.

"While payment of incentives to REs' (regulated entities) employees by third parties has been prohibited, the directions do not prohibit payment of incentives by REs to their employees," the central bank said. Rather, the objective of the provision is to ensure that the incentive structures do not lead to aggressive sales practices or mis-selling of products/services.

The latest amendments to the 'Advertising, Marketing and Sale of Financial Products and Services by Regulated Entities' comes amid a rise in complaints about customers being misled into buying financial products that may not be suitable for them.

What is mis-selling?

RBI laid out a broad definition of mis-selling, which includes practices such as offering products that are unsuitable for the customer, providing misleading or inaccurate information, selling products without obtaining explicit consent from the customer, and mandatorily bundling products together.

"In cases where mis-selling of a financial product/service is established, the bank shall refund the entire amount ... and also intimate the customer about cancellation of the sale," the RBI said.

What the new rules say:

• The guidelines apply across all platforms and channels. Regulated entities (REs) will be accountable for the advertising, marketing, and sale of financial products, though these activities are carried out through agents, partners, or outsourced service providers.

"The directions adopt a principle-based and channel-agnostic approach, placing overall responsibility on the RE for all advertising, marketing and sale of financial products undertaken directly or through agents or outsourced arrangements," it said.

• Influencers, affiliates, LSPs, or any other similar digital marketing intermediaries engaged for promotion or customer acquisition would fall within the broader category of DSAs/DMAs.
• Banks must obtain clear and informed consent from customers before selling any product, the central bank said. The consent must be recorded and cannot be assumed or pre-selected.
• The central bank also prohibited lenders from forcing customers into buying additional products, a practice known as bundling, unless offered or without additional cost.
• Among other curbs, banks cannot fund the purchase of financial products from loan proceeds without explicit approval, the RBI said.
• Lenders must also disclose key product features, risks, fees and exit terms upfront and design simple ways for customers to opt out of marketing communication, the central bank said in its directives.

What it means for customers:

• Banks and NBFCs will find it harder to push unsuitable products just to meet sales targets.
• Advertisements, influencer promotions, and marketing campaigns will need to present product features, risks, charges, and conditions more clearly.
• Financial products promoted through social media influencers, affiliates, or digital channels will be subject to stricter oversight.
• If a bank's influencer, agent, or digital marketing partner makes misleading claims, the bank or NBFC can be held responsible.