RBI plans guidelines to curb mis-selling of financial products in FY26

As complaints rise, RBI will frame rules in FY26 to curb mis-selling of financial products by banks and NBFCs, with possible impact on insurers' banca channels

The Reserve Bank of India (RBI) is likely to come up with suitable guidelines to address the misselling of financial products and services by its regulated entities, the central bank said in its agenda for the current financial year (FY26).

 

This comes amid concerns of misselling by banks, and non-banking finance companies (NBFCs), which distribute a range of products, including insurance policies, mutual funds, among other things for insurance companies and asset management companies.

 

“RBI is going to look at the way banks, NBFCs etc. are selling insurance, mutual fund products and may impose restrictions or tighten rules. It has implications for life insurance as 50 per cent is a banca channel for private life insurance companies,” said Suresh Ganapathy of Macquarie Capital. 

 

For private sector life insurance companies, around 50 per cent of their business comes from the bancassurance channel. If RBI tightens rules around selling of financial products by banks, it will have a bearing on the insurance companies as well as banks fee income.

 

In FY25, RBI received 2,96,000 complaints, up marginally from previous year. Most complaints were directed at banks, followed by NBFCs and credit information companies (CICs). The main areas of concern were loans and digital banking services.

 

“As financial inclusion deepens, the range of financial products offered will naturally expand. While this is a positive development, it also brings challenges—particularly around conduct and ensuring that there is no mis-selling. With the growing reliance on fee-based income, there is a tendency by certain financial institutions to push products to individuals who may not fully understand them or are not ready for them,” said Vivek Iyer, Partner and Financial Services Risk Leader, Grant Thornton.

 

Iyer added that, “This highlights the need for a robust regulatory framework to prevent mis-selling and protect consumers. Regulators are increasingly focused on analyzing customer complaints and mis-selling has been a concern consistently. While regulators always try not to become overly prescriptive about regulations unless there is a significant increase in complaints.”