Athira Sethu
17 June 2026
People end up purchasing insurance policies, investment programs, or any other type of financial products from banks without understanding the risk, costs, and terms of the agreement. In an effort to protect clients from these issues, the Reserve Bank of India (RBI) has implemented some new guidelines which will be applicable from January 1, 2027.
These guidelines are designed to prevent the mis-selling of financial products by banks and to ensure that banks operate in the best interest of their clients.
Definition of Mis-Selling
As per the RBI, mis-selling refers to the sale of products where:
- An unsuitable product is offered for sale to a customer irrespective of whether the client accepts the offer or not.
- Inadequate and inaccurate information is provided regarding the product being sold.
- Misleading information is provided to customers about any product or service.
- The customer does not give his/her explicit consent to purchase the product.
- Compulsory bundling of products – The product desired by the client is purchased alongside another product.
- Or any other practice considered as mis-selling by financial regulatory bodies.
How will RBI curb mis-selling?
To curtail mis-selling, the RBI instructed banks to undertake some measures, such as:
- Developing polices that do not incentivize the bank’s employees to engage in mis-selling practices.
- Avoiding any mandatory package deals of services or products.
- Refusing to provide favorable funding terms just because customers choose the bank’s products.
- Avoiding any use of “dark patterns” in the bank’s online platform like websites and mobile banking platforms.
Customer’s Role
In case of mis-sale, a customer is entitled to file a complaint with the bank. The customer needs to adhere to the complaint filing timeframe if a regulator sets it. However, when there are no established timelines, the complaint is due within 30 days after signing the contract.
Refunds and Compensation
Where there is evidence that mis-selling has occurred, then a complete refund is due from the bank for all monies spent on that particular financial product or service by the client.
Clients may also be compensated where any additional loss is experienced because of such an occurrence.
The introduction of these rules will play a vital role in securing the interests of customers in financial institutions. This will help to achieve the objectives of transparency and fairness in dealings with the customers and also ensure refunds and compensations for any misleading actions.
