New Delhi, March 27: Amid rising complaints in the banking and financial services sector, the Reserve Bank of India (RBI) is set to implement strict measures against mis-selling. The proposed new regulations are expected to come into effect in July 2026, aiming to curb the sale of financial products based on misleading or incorrect information. Under these rules, customers who feel they have been misled into purchasing a product will have the right to file a complaint. If the investigation confirms the complaint, banks will be required to refund the entire amount to the customer.
Mis-selling refers to the practice of selling financial products by providing incorrect information or going against the customer’s needs. This often occurs when bank employees, under pressure to meet targets or earn commissions, sell insurance, mutual funds, or other third-party products without disclosing accurate information. In many cases, risks, terms, and actual returns are concealed.
Examples of mis-selling include misleading a customer into believing that a Unit Linked Insurance Plan (ULIP) is a safe investment, forcing insurance onto loans, or selling long-term policies to elderly individuals without proper context. Often, customers are only informed about the benefits, while the risks or downsides are not disclosed.
Under the new RBI regulations, all banks will need to establish clear procedures for registering customer complaints. If a customer is not informed of a timeline, they can file a complaint within 30 days of purchasing the product. If an error is confirmed during the investigation, the bank will not only have to cancel the product but also refund the full amount and compensate for any losses incurred.
The draft also states that banks will not incentivize their employees for mis-selling. Additionally, banks will be required to collect feedback from customers within 30 days of selling third-party products. This feedback will be used to prepare reports every six months, enhancing transparency in the system.
In recent years, banks have seen a continuous increase in earnings from third-party products. For instance, the State Bank of India (SBI) earned thousands of crores in commissions from such products in the financial year 2024-25. In light of this growing trend, the government and regulatory agencies are adopting a stricter stance. Recently, Finance Minister Nirmala Sitharaman advised banks to focus on their core functions—deposits and loans.
Therefore, customers should carefully read the documents before purchasing any financial product. It is essential to obtain written information rather than relying solely on verbal assurances. If anyone believes they have been wronged, they can file a complaint on the bank’s website or with the insurance ombudsman.
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