The Reserve Bank of India (RBI) is set to introduce a comprehensive set of guidelines in FY26 aimed at enhancing consumer protection and increasing transparency in the financial sector. This initiative seeks to curb the mis-selling of financial products by banks and Non-Banking Financial Companies (NBFCs). It comes in response to a growing number of complaints from customers who have been sold unsuitable or misleading financial products, particularly third-party offerings like insurance policies and mutual funds.
What Will the Guidelines Cover?
The upcoming framework will address both proprietary and third-party product sales. This includes investment products such as insurance, mutual funds, and various financial instruments that are often aggressively marketed by bank employees. The RBI’s primary objective is to ensure that customers receive products that align with their financial needs, goals, and understanding, rather than being pressured into making purchases that primarily benefit the selling institution.
RBI’s New Tool: Consumer Protection Assessment Matrix (CoPAM)
To assess how well financial institutions are upholding consumer rights, the RBI is developing a Consumer Protection Assessment Matrix (CoPAM). A pilot program of this assessment tool has already commenced with selected banks. CoPAM is expected to serve as a critical benchmark for evaluating whether banks and NBFCs are following fair practices in their sales of financial products.
ALSO READ: FCRF Launches Campus Ambassador Program to Empower India’s Next-Gen Cyber Defenders
Enhancing Complaint Redressal Mechanisms
In fiscal year 2025, the Reserve Bank of India (RBI) received approximately 296,000 complaints, mainly about loan products and digital banking. To improve the grievance redressal process, the RBI plans to use artificial intelligence, introducing chatbots for lodging complaints and AI systems for prompt resolution.
To boost consumer awareness, the RBI conducted 239 awareness programs and 47 town hall meetings, targeting students, senior citizens, and women. These sessions covered topics like digital banking security and fraud prevention. The central bank also plans to release animated videos explaining common financial scams and how to avoid them.
The RBI emphasizes the need for financial products to be suitable for consumers before sale. Supervisory inspections will now evaluate compliance with these standards, and the bank’s fair practice code must be genuinely implemented, not merely a formality.
This post has been authored by Mr. Anirudh Mittal, a law student at the National Forensic Sciences University, currently pursuing B.Sc. LL.B(Hons.).