RBI sets rules for selling financial products

Reserve Bank of India (RBI) has clarified that payment of incentives by third parties to employees of regulated entities (REs) is prohibited but banks of NBFCs are free to incentivise employees for sale of financial products.In final norms on advertising, marketing and sales of financial products RBI said the intention is to ensure that the incentive structures do not lead to aggressive sales practices or mis-selling of products.

The final directions are effective from January 1 2027.The central bank further clarified that social media influencers or other digital marketing intermediaries engaged for promotion or customer acquisition would fall under the definition of direct selling agent (DSA) / direct marketing agent (DMA) engaged by REs to market their products.Mis-selling of a product will be evaluated based on the customer’s profile at the time of sale not at the time of the complaint by the customer, RBI said.

Further, suitability assessment shall be carried out only in sale of financial products / services to an individual customer which are not deemed to be suitable for all types of customers, RBI said.RBI has also done away with the provision to take an additional confirmation from a customer after having applied for a product or a service, as feedback from REs said that such a requirement will lengthen the turnaround time and affect time sensitive market transactions.

“The requirement has been modified to mandate REs to send an acknowledgement regarding receipt of the application for the specific product / service, which shall also contain a telephone number through which the customer can contact in case he / she has further queries,” RBI said.RBI has also clarified that request for customers to access to device features such as camera, location, or similar functionalities can be made provided the same has been transparently disclosed to the customer in which case it shall not be construed as a forced action. ...