RBI Issues Stricter Rules to Curb Mis-selling of Financial Products, Effective January

Banks are prohibited from using incentive schemes that encourage aggressive sales methods under the stricter regulations for preventing mis-selling of financial products and services that the Reserve Bank released on Monday.

The amended rules, which take effect on January 1, 2027, take a ‘principle-based and channel-agnostic approach’ that encompasses digital marketing intermediaries hired by banks and other financial institutions as well as social media influencers, reported by PTI.

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The final guidelines are based on draft recommendations issued in February that suggested a thorough framework for banks and non-banking financial companies (NBFCs) to advertise, market and sell financial products and services, including those provided by third parties. According to the RBI, stakeholder feedback was examined prior to the release of the updated rules.

To state in a more descriptive way, the RBI stated that ‘influencers, affiliates, Loan Service Providers (LSPs) and other digital marketing intermediaries employed for product promotion or customer acquisition would be included in the larger category of Direct Marketing Agents (DMAs) and Direct Selling Agents (DSAs). Certain stakeholders had requested clarification on the application of the instructions to LSPs involved in customer acquisition activities and social media influencers employed by regulated firms.

The most recent changes to the ‘Advertising, Marketing and Sale of Financial Products and Services by Regulated Entities’ are being made in light of the growing number of cases involving the mis-selling of financial products and services to regular people, PTI reports further.