RBI Tightens Rules on Mis-Selling: Banks Must Refund Full Amount if Customers Are Misled

Stricter Guidelines to Protect Bank Customers:
Complaints of banks selling products or schemes to customers without their consent are common. The Reserve Bank of India (RBI) has now taken a strict stance. If it is proven that a customer was mis-sold a financial product or service, banks will be required to refund the full amount paid and compensate any loss suffered by the customer.

New Measures Against Mis-Selling:
The RBI has proposed new rules to prevent “mis-selling” practices. Banks are advised to avoid offering any incentives or rewards that may lead to customers being sold products against their interest.

The draft guidelines cover advertising, marketing, and sales by financial institutions. Key points include:

• Banks should not call customers without consent, and calls must only be made during office hours.
• Banks must ensure that internal policies do not incentivize employees or agents to push products or services. This includes preventing third-party staff involved in selling products from receiving direct or indirect incentives.
• Customers must be given the freedom to choose from multiple options and should not be forced into bundled products.
• If mis-selling is proven, banks must refund the full amount and provide compensation for any loss incurred.

Focus on Transparent Practices:
The RBI has also instructed banks to avoid using “dark patterns”—design strategies in user interfaces that mislead or manipulate customers. A list of nearly a dozen such practices has been shared for reference.

Next Steps:
The RBI Governor, Sanjay Malhotra, had earlier announced the introduction of these rules to curb mis-selling. Following the announcement, the draft guidelines have been issued for public feedback until March 4, 2026.

This move aims to strengthen consumer protection, ensure transparency in banking practices, and hold financial institutions accountable for misleading customers.