The RBI has warned banks to refund customers if mis-selling of third-party products is proven. Over the past few years, concerns have arisen about customers being pushed into buying insurance, mutual funds, or other third-party products without full understanding. The RBI has issued draft guidelines for 2026.
The Reserve Bank of India (RBI) has recently issued a stern warning to banks to refund customers in cases of proven mis-selling. This pertains to the sale of third-party products such as insurance, unit-linked insurance plans (ULIPs), and mutual funds. Over the past few years, complaints have increased about customers being encouraged to purchase these products without complete information.
The draft guidelines for 2026 incorporate responsible business conduct directions for banks. These include a ban on incentives to bank staff, prohibiting dark patterns in banking apps, restrictions on bundling financial products, and norms for direct selling agents. Customer consent will be mandatory. The RBI has set a deadline of March 4, 2026, for feedback on the draft norms.
This step is part of banking regulation in India for 2026, aimed at regulating the distribution of insurance and mutual funds by banks. According to sources, banks will have to refund customers if mis-selling is established.
