100% refund for mis-sold financial products and crackdown on dark patterns: How RBI’s new draft can benefit customers

There are many instances where a financial institution’s mis-selling of a financial product has led to monetary or emotional loss for a customer. The Reserve Bank of India (RBI) is tightening the noose on such institutions. The central bank has released comprehensive instructions on advertising, marketing and sales of financial products and services to all All India Financial Institutions (AIFIs).

The RBI’s draft titled ‘All India Financial Institutions - Responsible Business Conduct) Amendment Directions, 2026’ issued on February 11, 2026, lays down comprehensive instructions such as punishing AIFIs for mis-selling products, banning dark patterns and forced product bundling, etc. The RBI says these directions will come into effect from July 1, 2026.

The comments / feedback on the draft Amendment Directions may be submitted by the regulated entities and members of public / other stakeholders on or before March 4, 2026

RBI draft’s latest directions on the mis-selling of financial products

What is the mis-selling of financial products according to the RBI draft?

As per the draft’s guidelines, mis-selling refers to the sale of a financial product or service, whether own or a third party, by an AIFI, illustratively, in the following cases:
(i) Sale of a product/service, which is neither suitable nor appropriate in view of the customer’s profile even if with their explicit consent;
(ii) Sale of a product/service without providing correct or complete information or by giving misleading information
(iii) Sale of a product/service without customer’s explicit consent;
(iv) With the sale of a requested product/service compulsory bundling of another product/service;
(v) Sale of a product/service involving any other element defined by the financial sector regulator concerned as mis-selling.

What should AIFIs do to prevent mis-selling of financial products?

The RBI draft also outlines practises AIFIs should follow to stop mis-selling financial products-
An AIFI must ensure that its policies and practices (e.g., organising competitions among business units for the sale of products/services, earmarking specific days of the week/month for the targeted selling of particular products or services, etc.) neither create incentives for mis-selling nor encourage employees to ‘push’ the sale of such products or services. It shall be ensured specifically that no incentive is directly or indirectly received by the employees engaged in the marketing or sales of third-party products from the third party.

An AIFI shall not bundle the sale of any third-party product or service with any of its own product or service. In circumstances where the sale of the AIFI’s own product or service is contingent on the purchase of a third-party product/service, the customer shall be provided the option to purchase the same from any other company/agent and shall not be forced to purchase it through the third-party product/service provider with whom the AIFI has entered into an agreement.

An AIFI shall not fund the purchase of a product/service by a customer, whether of its own or of a third-party, out of any loan facility sanctioned to the customer without their explicit consent.

An AIFI shall ensure that its user interfaces do not deploy any dark pattern. User interfaces deployed by the AIFI shall be subject to user testing and periodic internal audit for the identification of any unfair features, including dark patterns. Further, the AIFI shall ensure adherence to the ‘Guidelines for Prevention and Regulation of Dark Patterns, 2023’ issued by the Central Consumer Protection Authority (CCPA), as amended from time to time.

AIFIs need to establish mechanism for customer feedback and compensation, says RBI draft.

The RBI draft emphasises AIFIs to establish a mechanism to seek feedback from customers, within a period of 30 days from the sale of any product or service. AIFIs need to ensure that customers have understood the features of products or services and also the risks associated with it.

The draft reveals the mechanism may include the selection of customers on a random basis for such feedback through modes such as call-backs or surveys. The surveys will be carried out by a department or a vertical of the AIFI, which is not associated with sale of product or service.

The draft also says a half-yearly report on the findings of the feedback should be prepared and utilised for the review of existing policies and the features of a product or service.

What can customers do if an AIFI mis-sells them a financial product?

The RBI draft provides customers the right to lodge a complaint regarding the mis-selling of a product or service with the AIFI within the timeline specified by the respective financial sector regulators.
The draft reveals in cases where no such timeline has been specified, customers can lodge a complaint within 30 days of receiving the signed copy of the terms and conditions/agreement.
How much refund can customers get if cases where mis-selling of a financial product has been established?
The RBI draft outlines the rules in cases where the mis-selling of a product or service has been established. The draft says in such a case, the AIFI shall refund the entire amount paid by the customer for the purchase of the product or service and intimate the customer about the cancellation of the sale, wherever applicable.
Further, the AIFI should also compensate the customer for any loss arising due to mis-selling, as per its approved policy, says the draft.