RBI finalises anti-mis-selling rules: banks must refund and compensate from 1 January 2027

The Reserve Bank of India finalised its Responsible Business Conduct (Second Amendment) Directions, 2026 on 15 June 2026, tightening rules on how banks, NBFCs and other regulated entities sell financial products. The directions take effect from 1 January 2027, giving lenders roughly six months to update their sales processes.

Who it applies to

The rules cover commercial banks, co-operative banks, small finance banks, payments banks, regional rural banks, All India Financial Institutions, NBFCs and housing finance companies — effectively every RBI-regulated lender that sells loans, cards, deposits, insurance or investment products to retail customers.

What changes for customers

Rule	What it means
Explicit, separate consent	Consent must be taken product-by-product — you cannot be signed up for a card, insurance policy and investment plan through one bundled tick-box.
No forced bundling	Lenders cannot make loan sanction conditional on buying insurance or investment products from their preferred partner.
Dark patterns banned	Pre-ticked checkboxes, hidden charges, fake urgency and confusing “no” options are prohibited on bank websites and apps.
Upfront disclosure	Fees, interest rate, risks, lock-in and exit terms must be clearly disclosed before consent is taken.
Refund + compensation	If mis-selling is established, the bank must refund the full amount paid and compensate the customer for any resulting loss, per its board-approved policy.
Post-sale feedback	Banks must seek customer feedback within 30 days of a sale — via call-back or survey — to confirm the customer understood the product and its risks.

Why it matters

Mis-selling of insurance and investment products alongside loans and deposits has been a long-standing complaint against Indian banks. Until now, customers who were pushed into an unwanted policy or ULIP while taking a loan had limited recourse beyond the banking ombudsman process. The new directions put a firm compensation obligation on the lender itself, not just a warning or fine.

What to do now

Nothing changes immediately — the rules apply from 1 January 2027. But it’s worth knowing your rights are strengthening: from next year, if you’re pressured into bundling a policy with a loan or card, you’ll have a clearer basis to demand a refund. Until then, read the fine print before signing any consent form, and never let “your loan approval depends on it” go unchallenged when it comes to add-on products.

Sources: Business Standard — RBI tightens norms on bundled products, lenders to refund for mis-selling, Deccan Chronicle — RBI tightens norms to curb mis-selling of financial products, Kotak Neo — RBI final guidelines on marketing and sale of financial products, effective January 2027.