RBI Unveils New Marketing Rules for Banks, Tightens Oversight of Influencers and Sales Practices
The RBI has issued new guidelines for the advertising, marketing and sale of financial products, tightening oversight of influencers, affiliates and sales practices to curb mis-selling and improve consumer protection.
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The Reserve Bank of India (RBI) has issued a comprehensive set of guidelines on advertising, marketing and sale of financial products and services with a view to curb mis-selling practices and enhance consumer protection in the financial space.
The new framework, which takes a principles-based and channel-agnostic approach, reflects the increasing complexity in how financial products are distributed across traditional and digital platforms and will come into effect on January 1, 2027.
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Focus on Responsible Selling Practices:
The new guidelines are part of RBI’s effort to ensure that sales targets and incentive structures do not lead to aggressive or misleading customer acquisition practices.
The central bank has barred regulated entities (REs) including banks and non-banking financial companies (NBFCs) from permitting third party product providers to give direct incentives to bank employees for selling financial products.
While institutions may continue to incentivise their own employees, the RBI has said that compensation structures need to be monitored closely so that these do not promote high pressure sales tactics or unsuitable product recommendations.
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Digital Channels Brought Under Regulatory Lens:
In a major expansion of its regulatory net, the RBI has clarified that the guidelines would be applicable equally to all marketing and distribution channels including the digital platforms.
The measure is aimed at addressing emerging issues related to the promotion of financial products via social media, affiliate networks and third-party digital intermediaries.
The RBI has widened the accountability of financial institutions by formally classifying social media influencers, digital affiliates and Loan Service Providers (LSPs) as Direct Selling Agents (DSAs) or Direct Marketing Agents (DMAs).
