Mis-sold an insurance policy or mutual fund and recovery agents harassing you? The Reserve Bank has issued guidelines to protect the gullible customers from mis-selling of financial products and reigning in the high-handedness of recovery agents for missing an EMI.
If it is proved that the financial product is mis-sold then the RBI has promised full refund. The new draft rules are aimed at improving how banks advertise, market and sell financial products and services.
It also bans incentives paid by third parties such as insurers and mutual fund houses to bank employees for selling their products.
RBI governor Sanjay Malhotra has taken two bold steps recently. Last Friday, the central bank issued two record-setting directions, called the Reserve Bank of India (commercial banks--responsible business conduct) amendment directions, 2026, which will come into effect from July 1—to protect customers from rampant pain of mi-selling financial products like insurance, mutual funds, and credit cards, among others, and asking banks to refund the entire amount if the complaint is proved and also preventing them from selling bundled products.
The other step is to reign in recovery agents with a slew of corrective measures to help a harried borrower from getting mistreated or harassed for missing a payment, by setting good conduct norms and limiting calling time to normal office working hours.
The norms against mis-selling comes as over the past a few years concerns have been raised about customers being pushed into buying insurance, mutual funds or other third-party products without making them understand fully or in some cases banks are bundling basic banking services with other products.
“It shall be ensured specifically that no incentive is directly/indirectly received by employees engaged in marketing/ sales of third-party products/services from the third-party,” the draft norms said.
The draft rules clearly state that a bank can’t bundle a third-party product with its own product, and customers must be given the option to buy that third-party product from any one. The regulator also said a bank should not advertise or market any third-party product or service as its own.
Customers can lodge complaints about mis-selling within 30 days of receiving the signed copy of the terms and conditions if the sector regulator has not already specified a time limit.
This could affect banks, insurers firms and mutual fund houses as banks earn fees by selling these products. Many of these companies depend heavily on banks for distribution.
The new RBI recovery agent norms protect borrowers by banning coercive tactics, abusive language, social media shaming, and calls before or after 8 am to 7 pm, while mandating recorded calls and agent certification. These rules increase transparency, ensure respectful treatment and hold banks liable for agent misconduct.