MUMBAI: The Reserve Bank is planning to issue a comprehensive set of norms on advertising, marketing and sales to the entities under its watch to help prevent rising instances of mis-selling of financial products and services to consumers.
The regulator said its focus on digital frauds, customer protection, and cybersecurity will also go up in the coming days.
“Mis-selling of financial products and services by regulated entities has significant consequences for both customers as well as the financial sector. Hence, it is proposed to issue comprehensive instructions to different categories of regulated entities on advertising, marketing and sales of financial products/ services, including aspects related to prevention of mis-selling,” the central bank said in its report on trends and progress of banking in 2024-25, released Monday.
“Further, it is proposed to review the extant instructions on conduct related matters associated with engagement of recovery agents and recovery of loans, and issue harmonised instructions in this regard,” the RBI said.
On digital frauds, the report said the Reserve Bank continues to work with stakeholders, including the Union home ministry, to develop and operationalise measures to curb cyber-enabled fraud and strengthen customer protection.
"Regulated entities need to put in place robust internal controls, ensure sufficient grievance redress officers at all levels, and enhance digital financial literacy to address digital frauds," the report said.
Recent initiatives by the Reserve Bank in this regard include the development of MuleHunter.ai to facilitate system-wide learning to identify and flag potential mule accounts. This has been implemented across 23 banks as of December 17, 2025, it added.
“Building on several customer protection measures implemented so far, the Reserve Bank announced a principle-based framework on authentication of digital transactions, while exclusive internet domains and designated numbering series were introduced for REs to reduce cyber security threats," it said.
“The Reserve Bank continues to work with stakeholders, including the Union home ministry, to develop and operationalise measures to curb digital and cyber-enabled fraud and strengthen customer protection. Regulated entities need to put in place robust internal controls, ensure sufficient grievance redress officers at all levels, and enhance digital financial literacy to address digital frauds,” the central bank said.
Another step is the digital payments intelligence platform (DPIP) to leverage AI to flag risky transactions and share intelligence for fraud detection and prevention.
The RBI further said instructions related to limited liability of customers in unauthorised electronic banking transactions, issued in 2017, are being reviewed in view of major shifts in the banking landscape, including the emergence of new payment channels, higher volumes of digital transactions, and evolving fraud patterns.
"This is expected to improve customer safeguards," the report said.
The Reserve Bank further said its regulatory and supervisory policies remain focused on reinforcing cybersecurity, mitigating fraud, enhancing customer protection, integrating climate risk awareness, and preserving financial stability as an overarching goal.
Balancing financial innovations with stability, strengthening public trust, and supporting sustainable development will continue to guide the Reserve Bank's policies going forward, it added.
It also highlighted that frauds present multiple challenges by exposing financial institutions to reputational, operational and business risks, while also weakening customer trust.
During FY25, though total number of frauds came down, the amount involved in fraud increased. "This was mainly due to the re-examination and reporting afresh of 122 fraud cases, amounting to Rs 18,336 crore after ensuring compliance with the apex court judgement of March 27, 2023," the report said.
Based on the date of occurrence of frauds, during 2024-25, the share of card/internet frauds in the total stood at 66.8% in terms of the number of cases, while the share of advances-related frauds was 33.1% in terms of the amount.
In 2024-25, private sector banks accounted for 59.3% of the total number of frauds reported, and public sector banks 70.7% of the amount involved.
Within private banks, card/internet-related frauds accounted for the largest share by number, and fraud related to advances constituted the largest share by value in 2024-25.
In contrast, state-owned banks reported the highest share of fraud related to advances, both in terms of the number of cases and the amount involved.
Stating that consumer protection is fundamental to strengthening trust and confidence in the financial system, the RBI said, “This, in turn, rests on fair treatment of customers and an efficient grievance redressal mechanism. While substantial progress has been made in improving consumer services, rising grievances continue to be a matter of concern. In this regard, consumer education and protection remains a policy priority of the Reserve Bank.”
With a view to enhancing the effectiveness of the internal ombudsman mechanism in regulated entities, the Reserve Bank said it "proposes a two-tier grievance redress structure within REs before escalating complaints to the internal ombudsman, and empowerment of the internal ombudsman with compensation powers and access to the complainants. These measures will help in timely and meaningful resolution of customer grievances, improve service standards and consumer confidence."