RBI Issues New Norms For Sale Of Financial Products To Stem Mis-Selling

The Reserve Bank of India (RBI) announced its new guidelines on June 16 related to the sale of financial products and services. The new framework will come into effect from January 1, 2027.

Under the revised guidelines, regulated entities (REs), including banks and non-banking financial companies (NBFCs), will be held responsible for the promotion and distribution of financial products carried out directly or through third-party arrangements.

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The central bank said the directions adopt a principle-based and channel-agnostic approach, ensuring that the same standards apply across all modes of customer engagement.

Curbs On Incentive Structures

A key feature of the revised framework relates to employee incentives linked to product sales. The RBI clarified that third parties will not be allowed to pay incentives to employees of regulated entities. While banks and NBFCs may continue to compensate their own employees, incentive structures should not encourage aggressive selling practices or result in customers being sold unsuitable financial products.

According to the central bank, the objective is to strengthen customer protection and reduce instances where sales targets influence product recommendations.

Wider Scope For Digital Marketing Channels

The revised directions also expand the regulatory framework to cover digital customer acquisition and promotional channels.

The RBI said social media influencers, affiliates, Loan Service Providers (LSPs) and similar digital marketing intermediaries engaged for product promotion or customer acquisition will be treated as part of the broader category of Direct Selling Agents (DSAs) and Direct Marketing Agents (DMAs).

The clarification follows feedback received during the consultation process, with stakeholders seeking greater clarity on whether influencer-led promotions and digital lead-generation activities would fall within the scope of the proposed regulations. To address these concerns, the central bank said the relevant definitions have been modified in the final framework.

Draft Norms Reviewed Before Finalisation

The revised directions follow draft guidelines issued in February, which proposed comprehensive standards for the advertising, marketing and sale of financial products and services, including third-party offerings distributed by regulated entities.

After reviewing comments from industry participants and other stakeholders, the RBI issued the final directions with certain modifications.

The central bank said the framework is intended to establish consistent conduct standards across all distribution channels while ensuring that regulated entities remain accountable for customer-facing activities undertaken on their behalf.

With digital marketing and third-party distribution playing an increasingly important role in financial services, the revised norms seek to strengthen oversight and improve transparency in the sale of financial products to retail customers.