RBI Issues Stricter Norms to Curb Financial Product Mis-selling

Mumbai, Jun 15 (PTI) The Reserve Bank on Monday issued stricter norms to curb mis-selling of financial products and services, barring banks from having incentive structures that promote aggressive sales practices.

The revised provisions, which will come into effect from January 1, 2027, adopt a "principle-based and channel-agnostic approach" that also covers social media influencers as well as digital marketing intermediaries engaged by banks and other financial institutions.

The latest amendments to the 'Advertising, Marketing and Sale of Financial Products and Services by Regulated Entities' come in the backdrop of rising instances of mis-selling of financial products and services to common people.

"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.


In February, the central bank had issued draft amendment directions proposing to have comprehensive instructions on advertising, marketing and sale of financial products and services (including third-party products and services) by banks and NBFCs.

After examining the feedback, the Reserve Bank of India (RBI) has issued the final amendment directions.

"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.

Some of the stakeholders had sought clarification on the applicability of the directions to social media influencers engaged by REs for marketing of their products/services and Loan Service Providers (LSPs) engaged in customer acquisition and related activities on behalf of REs.

"The definition has been suitably modified to provide clarity in this regard," the RBI said.