Source: ET
Why in News?
The Reserve Bank of India (RBI) has issued draft amendment directions on:
- Advertising, marketing and sales of financial products
- Conduct of regulated entities in loan recovery
The rules are expected to take effect from July 1, 2026, aiming to strengthen consumer protection in banking and financial services.
Objective
- Curb mis-selling of financial products.
- Reform incentive structures that promote unsuitable sales.
- Prevent coercive loan recovery practices.
- Improve transparency and customer trust.
Key Provisions — Mis-selling and Product Sales
1. Ban on Incentive-Driven Third-Party Sales
- No incentives for bank employees to sell third-party products (e.g., insurance).
2. Restrictions on Product Bundling
- Forced bundling of financial products prohibited.
- Loan funds cannot be used to purchase bundled financial products.
3. Ban on Dark Patterns
- Manipulative digital interface designs prohibited.
4. Customer Suitability Assessment
Banks must evaluate:
- Age
- Income
- Risk tolerance
before recommending products.
5. Explicit Customer Consent
- Separate consent required for each product.
- Option to buy third-party products from provider of choice.
6. Customer Feedback Mechanism
- Feedback to be collected within 30 days of sale.
- Half-yearly reports to identify recurring issues.
7. Compensation for Mis-selling
- Full refund of payments.
- Compensation for associated losses.
8. Expanded Definition of Mis-selling
Includes:
- Unsuitable products sold even with formal consent.
- Pressure or restricted choice of providers.
Key Provisions — Loan Recovery Practices
Prohibited Practices
- Harassment or threats
- Public humiliation
- Excessive or anonymous calls
- Contacting relatives
- Recovery outside permitted hours
Compliance Requirements
- Recording of recovery calls
- Training of recovery agents
- Clear grievance redress mechanisms
