RBI Bans Bundling Of 3rd Party Products To Curb Mis-Selling

Mumbai: The Reserve Bank of India (RBI) on Wednesday issued draft comprehensive guidelines 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 Directive on ‘Advertising, Marketing and Sale of Financial Products and Services by Regulated Institutions’ defines misselling to include situations such as selling products that do not suit the customer’s profile, providing misleading or incomplete information, selling without ‘explicit consent’ and forcing customers to ‘forced packaging’ of products.

Under the proposal, banks must establish a comprehensive policy governing the sale of both their own and third-party financial products. The policy should address the suitability and suitability of products, customer feedback mechanisms and compensation in the event of mis-selling.

The proposed norms prohibit banks from bundling third-party products with their own offerings or marketing third-party products as their own. Promotional materials must be clear and factual; fees, charges and interest rates must be fully disclosed.

Products and services may only be sold with the customer’s express consent, and approvals for multiple products cannot be combined.

Unless specifically permitted by the customer, sales calls and visits will only be permitted between 9am and 6pm. Banks are also prohibited from using “dark patterns” in their user interfaces and must conduct user testing and periodic internal audits to identify and eliminate such practices.

Additionally, banks must receive customer feedback within 30 days of product sale. If mis-selling is detected, banks will be required to refund the amount paid and compensate customers.

Comments on the draft instructions can be submitted by regulated entities on or before March 4, and the new regulations will come into force from July 1. These will be applicable to commercial banks other than Small Finance Banks, Payment Banks, Regional Rural Banks and Local Area Banks.

The RBI draft also defined direct selling agents (DSAs) and direct marketing agents (DMAs) who sell their own or third-party products. Banks will now be required to maintain an updated list of such agents and publish it on their websites. The central bank said agents operating on bank premises should be clearly distinguishable from bank employees.