RBI Takes Strict Action on Mis-Selling: Customers Entitled to Full Refund

New Delhi, February 13:The Reserve Bank of India (RBI) has issued stringent draft guidelines to tackle mis-selling by banks and financial institutions, ensuring that customers are fully protected from unfair practices. Under the proposed rules, financial institutions must refund 100% of the amount paid by a customer if a product or scheme was sold inappropriately.

What Constitutes Mis-Selling

According to the RBI draft:

• Selling a product that does not match the customer’s profile, even if the customer agrees.
• Providing incomplete, misleading, or false information about a product.
• Selling a product without the customer’s explicit consent.
• Forcing customers to purchase additional products alongside their desired product.

These practices are considered mis-selling, and institutions found guilty will face strict penalties.

Customer Complaint Process

Customers who believe they have been mis-sold a product can file a complaint with the concerned financial institution (AIFI) within the prescribed timeframe. If no specific timeframe exists, complaints can be lodged within 30 days of receiving the signed terms and conditions copy.

Refund and Compensation

If mis-selling is established, the financial institution must:

• Refund the full amount paid by the customer.
• Compensate the customer for any additional losses incurred.

Institutional Responsibilities

To prevent mis-selling, financial institutions must:

• Avoid creating policies that pressure employees to sell products through targets or competitions.
• Ensure employees do not receive direct or indirect commissions for selling external company products.
• Prohibit forced bundling of products with unrelated offerings.
• Eliminate dark patterns or deceptive designs on apps and websites, and audit their platforms regularly.

These rules, aimed at safeguarding consumers, are set to come into effect from July 1, 2026, marking a major step toward fair and transparent financial practices in India.