India’s banking regulator wants banks to stop selling unsuitable financial products under the cover of “customer consent." On February 11, 2026, the Reserve Bank of India released draft directions on advertising, marketing and sales practices for regulated entities.
The RBI draft says a customer’s signature does not legitimize a product that does not match the customer’s profile. The proposal responds to long-running complaints from customers who say staff pushed insurance, mutual funds, or other third-party products without clear explanations.
Reported patterns include selling unit-linked insurance plans to senior citizens as fixed deposits and linking loan approvals or lockers to extra products. In November 2025, Nirmala Sitharaman asked banks to curb mis-selling to protect trust in the banking system.
The draft expands the definition of mis-selling beyond outright deception. It includes selling a product that does not suit a customer’s profile, even when the customer gives explicit consent. It also covers sales made with incomplete or misleading information, or without clear acceptance from the customer.
The draft expects banks to assess product features, risks, fees and complexity against the customer’s profile. It lists factors such as age, income, education, and risk tolerance. In a policy message on the initiative, the RBI said mis-selling has “significant consequences” for customers and institutions.
The draft targets “compulsory bundling," where a bank makes one product or service conditional on another. Under the proposal, banks cannot require the purchase of insurance, an investment plan, or any add-on as a condition for a loan or another banking service.
The rules also address “dark patterns” in digital journeys. These refer to deceptive user-interface tactics that nudge customers into actions they did not intend. The draft calls for advertisements and brochures that remain clear and factual. It also seeks stronger supervision over staff, direct selling agents, and other third parties involved in sales inside branches and online.
Where mis-selling is established, the draft requires the bank to refund the full amount paid for the product. It also requires compensation for losses related to the transaction, under a board-approved policy. Banks must adopt a sales code of conduct and set penalties for violations.
The draft also discourages sales incentives and contests that can reward mis-selling.
The draft tightens how banks record consent. Consent for multiple products cannot be bundled into one approval. Banks must obtain consent for each product separately and make the terms available before consent. It also asks banks to prevent consent without viewing key terms.
The draft also requires banks to seek customer feedback within 30 days of the sale and review the results in half-yearly reports. Stakeholders can send feedback on the draft until March 4, 2026, and the RBI has proposed July 1, 2026, for implementation. Customers can complain to the bank first and then escalate through the RBI’s integrated ombudsman mechanism if they remain dissatisfied.
Separate data shows why mis-selling remains a live issue. RBI data shows the Offices of the RBI Ombudsman received about 2.96 lakh complaints in FY25, with banks accounting for most cases. In insurance, the Insurance Regulatory and Development Authority of India reported 120,429 grievances against life insurers in FY25, including 26,667 complaints classified as unfair business practices.