RBI Draft Rules to Ban Third-Party Sales Incentives at Banks
Why in the news
To stop mis-selling of outside products through bank branches, the Reserve Bank of India drafted rules removing outside incentives and tightening consumer safeguards.
Key facts
- Timeline: comments till 4 March 2026; proposed effective date 1 July 2026.
- Core ban: no direct or indirect incentives to bank staff from third parties; sales contests must not encourage mis-selling.
- No bundling: a bank product cannot hinge on purchasing a third-party one; customers choose any provider.
- Consent: explicit consent needed; loans cannot fund such purchases without express approval.
- Redress: full refund where mis-selling is proven, plus compensation as per approved policies.
Safeguards proposed
| Safeguard | Detail |
|---|---|
| Feedback | Within 30 days of sale |
| Complaints | 30 days from receiving signed terms, unless the sector regulator says otherwise |
| Review | Half-yearly reports to update policies |
| Suitability | Risk-return, time horizon, complexity, fees, customer age, income and financial literacy |
| Calls and visits | 9 a.m. to 6 p.m. only, otherwise with consent |
| Agents | Clearly distinguishable from staff; code of conduct for employees, DSAs and DMAs; penal provisions |
Background
- Banks earn fees from selling insurance, mutual funds and similar products of other firms.
- Third-party sales incentives are payments to bank staff or agents by insurers, fund houses or NBFCs for pushing their products.
- In November 2025 the Union Finance Minister underlined the need to protect public confidence in banks.
Exam angle
- Stage: draft amendment directions; regulator: RBI.
- Related terms: mis-selling, cross-selling, DSA, DMA.