From sales pitch to suitability check: What RBI’s draft mis-selling rules could mean for your money
Times of India
by MAHENDRA YADAVFebruary 24, 2026
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The Reserve Bank of India (RBI) has introduced a new set of guidelines aimed at curbing mis-selling practices by banks and financial institutions when selling insurance policies, loans, mutual funds, and other financial products. The draft All India Financial Institutions -- Responsible Business Conduct Amendment Directions, 2026, redefine mis-selling to include scenarios where customers are sold unsuitable or unexplained products, even if they provide explicit consent. The proposed framework shifts the onus from mere customer agreement to ensuring product appropriateness based on individual financial profiles.
Under the draft, institutions must conduct suitability assessments before selling any product. This involves evaluating a customer's age, income, financial literacy, and risk tolerance against the product’s characteristics like risk-return profile, fees, and investment horizon. The RBI emphasizes structured interactions, where agents are required to disclose all terms upfront, avoid coercive tactics, and refrain from misleading customers. Agents can only contact customers between 9 AM and 6 PM unless otherwise authorized, and must explain terms before completing a sale.
The draft also prohibits bundling additional products without explicit customer consent. This change marks a significant shift in financial sales practices, prioritizing transparency and customer protection. However, experts like Rohit Shah, a financial planner, caution that immediate behavioral changes may not be noticeable due to the slow implementation of such regulations. He suggests that sustained awareness campaigns are necessary for these rules to translate into meaningful customer interactions.
Shruti Ladwa, Partner at EY India, highlights the move towards more transparent and ethical distribution practices. She notes that while the framework is a step in the right direction, its success will depend on how institutions adapt their sales processes and prioritize customer needs over product推销. The RBI's initiative aligns with global efforts to enhance financial literacy and reduce instances of exploitation in financial
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Originally published on Times of India on 2/24/2026