RBI Proposes Ban On Third-Party Sales Incentives For Bank Staff

The Reserve Bank of India has issued draft amendments to its directions on advertising, marketing and sale of financial products and services by regulated entities, aimed at curbing mis-selling.

Under the proposal, banks will not be permitted to allow employees engaged in marketing or sale of third-party products to receive any direct or indirect incentive from such third parties, including insurance companies and mutual fund houses.

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The draft states that policies and internal practices, including competitions among business units, must not create incentives for mis-selling or encourage employees and agents to push products.

Bundling And Loan-Linked Sales Curbed

The regulator has proposed that banks shall not bundle third-party products with their own offerings. Where the sale of a bank’s product is made contingent on purchase of a third-party product, customers must be given the option to procure it from any provider of their choice.

Banks would also be barred from financing the purchase of any product or service, whether their own or a third party’s, from a loan facility sanctioned to a customer without explicit consent.

Customers may file complaints regarding mis-selling within 30 days of receiving the signed terms and conditions, where the relevant sector regulator has not specified a separate timeline.

Refunds, Compensation And Feedback Mechanism

In cases where mis-selling is established, banks will be required to refund the entire amount and compensate customers for any losses in accordance with approved policies.

The draft mandates that banks put in place a mechanism to seek customer feedback within 30 days of sale of any product or service to ensure customers understand the features and associated risks. A half-yearly report on such feedback must be prepared and used to review policies and product features.

Conduct Norms And Dark Patterns

The draft also sets conduct standards for direct selling agents. Telephonic contact and customer visits should ordinarily take place between 9 am and 6 pm, unless the customer consents otherwise. Agents present on bank premises must be clearly identifiable as distinct from bank employees.

Banks will be required to assess product suitability based on risk-return profile, time horizon, complexity, fee structure and customer characteristics such as age, income and financial literacy. Marketing of third-party products as the bank’s own would not be permitted.

The draft explicitly instructs banks to avoid use of “dark patterns” in digital interfaces, including false urgency, basket sneaking, confirm shaming and subscription traps.

The proposed norms are set to come into effect from July 1, 2026, with stakeholder feedback invited until March 4, 2026.