RBI tightens rules on selling financial products from January 2027

The Reserve Bank of India has prohibited third-party incentives to employees of regulated entities, while allowing banks and NBFCs to reward staff for selling financial products. New norms, effective January 1, 2027, aim to prevent aggressive sales and mis-selling by ensuring customers have choices and prohibiting product bundling. Social media influencers will be treated as direct selling agents.

New norms, effective January 2027, make regulated entities accountable across all distribution channels, including influencers, affiliates and digital marketing intermediaries.

New norms, effective January 2027, make regulated entities accountable across all distribution channels, including influencers, affiliates and digital marketing intermediaries.

The Reserve Bank of India has tightened norms for advertising, marketing, and selling financial products, effective January 1, 2027. These revised directions aim to curb mis-selling and hold regulated entities accountable across all distribution channels, including social media influencers and digital marketing intermediaries. The RBI clarified that incentive structures will be reviewed to prevent aggressive sales practices.

Reserve Bank of India (RBI) has clarified that payment of incentives by third parties to employees of regulated entities (REs) is prohibited but banks of NBFCs are free to incentivise employees for sale of financial products.In final norms on advertising, marketing and sales of financial products RBI said the intention is to ensure that the incentive structures do not lead to aggressive sales practices or mis-selling of products. The final directions are effective from January 1 2027.The central bank further clarified that social media influencers or other digital marketing intermediaries engaged for promotion or customer acquisition would fall under the definition of direct selling agent (DSA) / direct marketing agent (DMA) engaged by REs to market their products.Mis-selling of a product will be evaluated based on the customer’s profile at the time of sale not at the time of the complaint by the customer, RBI said. Further, suitability assessment shall be carried out only in sale of financial products / services to an individual customer which are not deemed to be suitable for all types of customers, RBI said.RBI has also done away with the provision to take an additional confirmation from a customer after having applied for a product or a service, as feedback from REs said that such a requirement will lengthen the turnaround time and affect time sensitive market transactions. “The requirement has been modified to mandate REs to send an acknowledgement regarding receipt of the application for the specific product / service, which shall also contain a telephone number through which the customer can contact in case he / she has further queries,” RBI said.RBI has also clarified that request for customers to access to device features such as camera, location, or similar functionalities can be made provided the same has been transparently disclosed to the customer in which case it shall not be construed as a forced action.