Mumbai: The Reserve Bank of India (RBI) on Wednesday issued comprehensive draft instructions aimed at curbing mis-selling of financial products by banks, tightening norms on advertising, marketing and sales practices, and strengthening customer protection. The draft amendment Directions for ‘Advertising, Marketing and Sales of Financial Products and Services by Regulated Entities’ define mis-selling to include cases such as selling products that are unsuitable for a customer’s profile, providing misleading or incomplete information, selling without ‘explicit consent,’ and forcing customers into ‘compulsory bundling’ of products.
Under the proposal, banks must frame a comprehensive policy governing the sale of their own as well as third-party financial products. The policy must address suitability and appropriateness of products, customer feedback mechanisms and compensation in cases of mis-selling.
The proposed norms ban banks from bundling third-party products with their own offerings or marketing third-party products as their own. Promotional material must be clear and factual, with full disclosure of fees, charges and interest rates.
Products and services may be sold only with explicit customer consent, and consent for multiple products cannot be clubbed together.
Sales calls and visits will be allowed only between 9 am and 6 pm, unless specifically authorised by the customer. Banks are also barred from deploying “dark patterns” on user interfaces and must conduct user testing and periodic internal audits to identify and eliminate such practices.
Additionally, banks must seek customer feedback within 30 days of a product sale. In cases where mis-selling is established, banks will be required to refund the amount paid and compensate customers.
Comments on the draft directions could be submitted by regulated entities on or before March 4, and the new regulations would come into effect from July 1. They will apply to commercial banks, excluding Small Finance Banks, Payment Banks, Regional Rural Banks and Local Area Banks.
The RBI draft has also defined direct selling agents (DSAs) and direct marketing agents (DMAs) engaged in selling own or third-party products. Banks will now be required to maintain and publish an updated list of such agents on their websites. Agents operating within bank premises must be clearly distinguishable from bank employees said the central bank.