RBI Draft Directions Propose To Curb Mis-Selling Of Financial Products By Banks, Ban Compulsory Bundling

The Reserve Bank of India has proposed to prohibit compulsory bundling of financial products, bar the use of “dark patterns” on digital platforms, and require explicit, product-wise consent before banks sell financial products to customers.

The proposals are part of the Draft Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Amendment Directions, 2026.

The framework will apply to Commercial Banks other than Small Finance Banks, Payment Banks, Regional Rural Banks and Local Area Banks.

To begin with, the draft formally defines “mis-selling”. It includes the sale of unsuitable or inappropriate products, sale without providing correct or complete information or by giving misleading information, sale without explicit consent, compulsory bundling of another product or service, and any other element defined as mis-selling by the concerned financial sector regulator.

In this context, “compulsory bundling” is defined as making availment of one product or service conditional upon availment of another. However, the draft clarifies that offering multiple products or services as a package based on voluntary consent, or on a complimentary basis without any additional direct or indirect cost, will not be treated as compulsory bundling.

Further, the RBI has proposed to prohibit the deployment of “dark patterns”, defined as deceptive user interface or user experience designs that mislead or trick users into taking decisions they did not intend. Accordingly, banks will be required to ensure that their user interfaces do not deploy such practices and are subject to user testing and periodic internal audit.

The draft also strengthens consent requirements. Products or services, whether own or third-party, may be offered or sold only with the customer's explicit consent. Such consent must be specific, informed and unambiguous, and cannot be clubbed for multiple products or purposes.

In addition, banks will be required to put in place a comprehensive policy governing advertising, marketing and sale of financial products. This policy must address suitability and appropriateness of products, feedback mechanisms, and compensation in cases of mis-selling.

The draft further regulates Direct Selling Agents (DSAs) and Direct Marketing Agents (DMAs). Banks must frame policies covering their eligibility, due diligence, training, monitoring, and penal action. At the same time, agents must not mislead or coerce customers, falsely represent themselves as bank employees, or make unauthorised commitments on behalf of the bank.

As regards customer contact, telephonic calls or visits shall normally be made between 9 AM and 6 PM, unless expressly authorised otherwise. Banks are also required to comply with applicable regulations governing commercial communications and customer preference registration.

Finally, where mis-selling is established, banks shall refund the entire amount paid by the customer and compensate for any loss arising due to such mis-selling, in accordance with their approved policy.

The regulator has proposef that these directions take effect from July 1, 2026