The Reserve Bank of India (RBI) has announced final rules for the sale and marketing of financial products by banks and non-banking financial companies (NBFCs) which will be effective from January 2027. The regulations are designed to further reinforce the principle of consumer protection, increase transparency and take account of the current issues surrounding the mis-selling of financial products.

Key Highlights

• RBI mandates explicit customer consent and accountability to curb financial product mis-selling practices.
• New rules cover banks, NBFCs, influencers, and digital agents from January onward.

The instructions follow a principle-based and channel-agnostic approach, and leave it to the regulated entities (REs) to be responsible for all the advertising, marketing and sales activities that they carry out, either through their own channels or via third parties.

Influencers and Digital Intermediaries Brought Under Regulatory Purview

In a significant move, the RBI clarified that influencers, affiliates, lending service providers, and other digital marketing intermediaries engaged in customer acquisition or promotion activities will be treated as direct selling agents under the new framework.

The decision reflects the regulator’s growing focus on digital financial services and the need to ensure accountability across emerging customer acquisition channels.

Strong Focus on Explicit Customer Consent

A key feature of the guidelines is the emphasis on obtaining explicit consent from customers before selling any financial product. The RBI has defined explicit consent as a specific, informed, and unambiguous indication of agreement that must be properly recorded by the lender.

The regulator has explicitly stated that a consent for several products or services is not a single consent, but covers each product or service separately.

Signed declarations, electronic signatures, one-time password (OTP) verification, digitally recorded confirmations and clearly defined consent sections in agreements are illustrative methods of obtaining consent.

Banks and non-banking financial companies (NBFCs) will also be required to safely keep consent records and have adequate documentation to prove compliance if required.

RBI Strengthens Measures Against Mis-Selling

The RBI had, earlier this year, suggested a proper definition of “mis-selling,” and had included such practices as selling products that are not found to be suitable for the financial profile of a customer, providing misinformation or incomplete information and selling products without the express consent of the customer and forcing a customer to buy bundled products.

The regulator has repeatedly emphasized that the consequences of mis-selling can be detrimental not only for the customers, but also for financial institutions as well, resulting in financial losses, reputational damage and loss of consumer confidence.

The framework aims to ensure products are offered via bank branches, online, or via third parties are consistent with the needs, financial objectives and risk appetite of customers.

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Lenders Must Assess Product Suitability

Guidelines mandate that financial institutions have policies in place that are approved by their board for evaluating the suitability of a product before making recommendations or selling financial products. Age, income, financial literacy, investment goals and risk tolerance are likely to be taken into account when assessing the applicants.

The RBI, however, has not provided a specific format or methodology for conducting suitability assessments due to the product, segment and business model diversity among financial firms.

Rather, the regulator has called on self-regulatory organizations (SROs) and industry associations to work together to create sector-specific approaches that help foster uniformity while allowing flexibility in operation.

Customer Protection Takes Centre Stage

The final guidelines reflect the RBI's ongoing initiative to improve consumer protection measures in the fast-changing financial services sector in India. The regulator's new rules will make digital marketing channels more accountable, require stricter consent requirements and focus more on suitability assessments, creating a more transparent and customer-centric financial ecosystem.

The new regulations are expected to make financial products distribution more trusted and enable customers to have access to financial products that are suitable to their risk profile and needs.