Key facts
- RBI prohibits third-party incentives to employees of regulated entities for financial product sales.
- Banks and NBFCs can offer incentives to their own employees for sales.
- New guidelines aim to prevent aggressive sales and mis-selling.
- Mis-selling will be judged by customer profile at sale, not complaint time.
- Final norms are effective January 1, 2027.
The Reserve Bank of India (RBI) has issued its final guidelines concerning the advertising, marketing, and sales of financial products. A key clarification is that while regulated entities (REs) are prohibited from accepting incentives from third parties for their employees, banks and non-banking financial companies (NBFCs) are permitted to incentivize their own staff for selling financial products. These new norms, designed to curb aggressive sales tactics and mis-selling, will take effect on January 1, 2027.
The central bank stated that mis-selling will be evaluated based on the customer's profile at the time of the sale, rather than when a complaint is lodged. Suitability assessments will be required for financial products or services that are not deemed appropriate for all customer types. Additionally, the RBI has removed the provision for an additional customer confirmation after a product application, a change made in response to feedback that it could delay time-sensitive market transactions. Instead, REs will be mandated to send an acknowledgement of the application receipt, which will include contact information for customer queries.