Rules planned to curb mis-selling of products by banks and NBFCs

Mumbai: The Reserve Bank of India (RBI) is working on issuing guidelines to address mis-selling of financial products and services by banks and NBFCs, whether these are their own or third-party offerings.

In its annual report, the central bank said it will soon issue norms to curb mis-selling practices by regulated entities. This follows rising concerns over aggressive or misleading sales tactics used to push loans, insurance, or investment products without properly informing consumers.

In FY25, the RBI received 296,000 complaints, up marginally from the 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.

The RBI is developing a consumer protection assessment matrix (CoPAM) to evaluate how well banks and other financial institutions safeguard customer interests. A pilot programme is currently underway with select banks. On green deposits, RBI will review the framework for acceptance of green deposits and also issue guidelines on sustainability in flows.

To understand the low volume of complaints from rural and semi-urban areas, the RBI conducted a survey to gauge consumer awareness and identify outreach gaps. Based on the findings, more targeted education efforts are being planned.

To improve financial literacy and safety, the RBI held 239 awareness programs and 47 town hall meetings in FY25, focusing on students, women, and senior citizens. Key topics included digital banking safety, Aadhaar-enabled payment systems, and scam prevention. The RBI also plans to release animated videos illustrating common frauds and how consumers can stay safe.

Also, the RBI is revamping its complaint management system by integrating artificial intelligence in phases. In the first phase, a chatbot will assist users in lodging complaints. In the second phase, AI tools will help process and resolve grievances.