The Reserve Bank of India (RBI) is set to take strict action against mis-selling of financial products.
Complaints about banks misleading customers have been on the rise, and the new rules—likely to come into effect in July 2026—aim to protect consumers.
Under these rules, if a customer feels misled, they can file a complaint.
If the bank is found at fault, it will have to refund the entire amount and compensate for any losses.
What Is Mis-Selling and How Does It Happen?
Mis-selling happens when a financial product is sold to a customer with wrong or incomplete information, or when it doesn’t suit their needs.
Often, bank employees, under pressure to meet targets or earn commissions, push products like insurance, mutual funds, or ULIPs without explaining the risks.
For example:
Selling a ULIP to someone looking for a safe fixed deposit.
Forcing insurance on a loan.
Offering long-term policies to elderly customers.
In many cases, customers are only told the benefits, while the risks or conditions are hidden.
Key Changes in the New RBI Rules
The RBI’s draft rules aim to make the system more transparent and customer-friendly:
Banks must set up clear complaint systems for customers.
Customers can raise complaints within 30 days if they were not informed of deadlines.
If mis-selling is confirmed, the product must be canceled, and the full amount refunded along with compensation.
Banks cannot incentivize employees for selling third-party products.
Customer feedback must be collected within 30 days, and a report prepared every six months.
These steps are meant to make banks more accountable and protect customers from unfair practices.
Why Customers Should Be Careful
Revenue from third-party products has grown steadily.
For instance, SBI earned thousands of crores in commissions during 2024-25.
With this rise, regulators and the government are emphasizing that banks focus on their core functions—deposits and loans.
Customers should:
Read all documents carefully before buying financial products.
Rely on written information, not just verbal advice.
File complaints on the bank’s website or with the Insurance Ombudsman if they feel wronged.
These rules aim to make banking safer and ensure customers aren’t misled in their financial decisions.
