RBI takes action against banks over misuse of sales practices

The Reserve Bank of India (RBI) has issued strict new regulations to curb the practice of mis-selling financial products and services through misleading information. The move aims to protect customers from being forced or misled into purchasing unsuitable financial products by banks and financial institutions.

Under the revised guidelines titled “Advertising, Marketing and Sale of Financial Products and Services by Regulated Entities,” banks are prohibited from pressuring employees to meet aggressive sales targets or offering incentive-based sales push strategies. The rules will come into effect from January 1, 2027.

The RBI has also banned third-party incentives and rewards from insurance companies and mutual fund firms to bank employees. It has expanded the definition of direct selling agents to include influencers and digital marketers, making banks fully responsible for any misleading promotions done on their behalf.