RBI Proposes July 1 Rollout of Stricter Mis-Selling Rules for Banks in India

RBI’s draft curbs bank mis-selling with a 100% refund, loss compensation, and a dark-pattern ban, aiming for rollout from July 1, 2026. 

What Is The Problem With Bank Sales Today? 

Banks have increasingly been accused of pushing third-party products like insurance, cards and investment-linked plans through aggressive pitches at branches, over calls, and inside app journeys. Customers often complain of forced bundling with loans, unclear charges, and being nudged into products that do not match their risk profile. 

The RBI has now proposed tighter rules to clean up how banks advertise, market and sell financial products. The draft framework invites public comments till March 4, 2026, with a proposed implementation date of July 1, 2026.

Why RBI Has Stepped In Now?

The trigger is simple: customer consent has often been used as a shield even when the product sold was unsuitable. The draft changes that approach by saying suitability and appropriateness must be assessed against the customer’s profile, not just signatures or clicks. 

The RBI also proposes banning “dark patterns” that mislead users through interface design, urgency prompts, and confusing opt-ins. If mis-selling is established, banks may have to refund fully and compensate losses.

What The Draft Proposes And How It Hits Banks?

The draft framework aims to reset sales behaviour across branches, tele-calling and digital journeys. It tightens definitions around mis-selling, including cases where products are not aligned to age, income, education and risk appetite, even if “consent” exists. It also targets forced bundling, misleading promotions, and third-party distribution practices used by banks. 

A key consumer-facing clause is financial: where mis-selling is established, banks would have to refund 100% of the amount paid and also compensate customers for losses arising from the mis-sale. This shifts the risk from customers to the selling institution, and is expected to push banks to redesign sales scripts, incentives, and disclosure formats.

Before the table below, note that this is still a draft and could be tweaked after public feedback.
 

After this, banks that relied on bundled selling or rushed digital funnels may need sharper suitability checks and better audit trails.

What Happened Before This Draft?

This draft fits into a wider consumer-protection push signalled through RBI’s recent policy communication. On February 6, 2026, RBI Governor Sanjay Malhotra spoke about strengthening customer protection across unauthorised digital transactions, mis-selling, and recovery practices.

Around the same time, RBI also proposed a compensation framework for small-value digital payment frauds. The draft proposal highlighted that 65% of such frauds involve losses under ₹50,000. The proposed one-time compensation is up to ₹25,000 or 85% of the amount lost, aimed at protecting small account holders and sustaining trust in digital payments.

Media coverage has also tracked RBI’s push on recovery conduct, with separate draft moves to curb harsh recovery practices and improve oversight of recovery agents.

Before the second table, this timeline shows how the regulator is moving on multiple retail pain points together.
 

After these steps, the direction is clear: retail conduct is moving to the centre of bank supervision.

What Stakeholders Are Indicating?

RBI’s stance, as reported, is that products must match the customer profile, and consent alone is not enough. Mint and Indian Express reports also flagged the focus on dark patterns, bundling and refunds, signalling sharper accountability for banks and third-party sellers.

Conclusion 

If finalised, the draft could make mis-selling costlier through mandatory refunds and compensation, while forcing cleaner digital and branch sales behaviour. Customers may see clearer opt-ins and stronger remedies, especially in bundled and third-party product sales.

LoansJagat explainer on RBI’s digital lending directions and regulated lending ecosystem context: