The Reserve Bank of India (RBI) last week introduced new rules to prevent the mis-selling of financial products – such as insurance, mutual funds or loans – by banks and other lenders. The new rules will come into effect from January 1, 2027
Under the new norms, banks cannot design incentive structures that encourage employees or agents to aggressively sell products. The revised rules also applies to social media influencers and digital marketing partners hired by banks and financial institutions.
More importantly, the new rules allow customers to file complaints with their bank if they believe a financial product or service was mis-sold to them. Here’s a look at how you can get your money back if you have been sold a misleading product
What is mis-selling? What does the rules say?
As per the definition, mis-selling includes practices such as offering products that are unsuitable for the customer, providing misleading or inaccurate information, selling products without obtaining explicit consent from the customer, and mandatorily bundling products together.
Here’s what the rules say:
- Banks must obtain clear and informed consent from customers before selling any product, the central bank said. The consent must be recorded and cannot be assumed or pre-selected.
- The central bank also prohibited lenders from forcing customers into buying additional products, a practice known as bundling, unless offered or without additional cost.
- Among other curbs, banks cannot fund the purchase of financial products from loan proceeds without explicit approval, the RBI said.
- Lenders must also disclose key product features, risks, fees and exit terms upfront and design simple ways for customers to opt out of marketing communication, the central bank said in its directives.
Customers can get a refund for any mis-selling – Here’s how
RBI clearly said in its release, “In cases where mis-selling of a financial product/service is established, the bank shall refund the entire amount … and also intimate the customer about cancellation of the sale.”
- The new rules allow customers to file complaints with their bank, within the given timeline, if they believe a financial product or service was mis-sold to them.
- In a case, the timeline is not specified, customers can lodge a complaint within 30 days of receiving the signed copy of the terms and conditions or agreement.
- If an instance of mis-selling is verified and established by the lender, the bank will be liable to refund the entire amount paid by the customer for purchase of the financial product or service and inform the customer about the cancellation of the sale, wherever applicable.
- Also, as per the bank’s approved policy, the customer will also be compensated for any additional loss arising due to mis-selling.