Sold wrong policy or loan? RBI plans strict rules for banks, NBFCs to curb mis-selling

The Reserve Bank on Monday said it plans to issue comprehensive instructions to banks and other regulated entities to prevent mis-selling of financial products and services to consumers.

The proposed norms will cover advertising, marketing and sale of financial products and services.

The RBI also said it will review existing instructions governing the conduct of loan recovery agents and the recovery of loans, with a view to issuing harmonised guidelines across different categories of regulated entities.

Digital frauds

About digital frauds, the RBI said it has introduced a principle-based framework for authentication of digital transactions, along with exclusive internet domains and designated numbering series for regulated entities to curb cyber security threats.

The report said the central bank continues to work with stakeholders, including the Ministry of Home Affairs, to develop and operationalise measures to curb digital and cyber-enabled fraud and strengthen customer protection.

"REs need to put in place robust internal controls, ensure sufficient grievance redress officers at all levels, and enhance digital financial literacy to address digital frauds," the report said.

Recent initiatives include MuleHunter.ai, an AI-based tool to identify and flag potential mule accounts, which has been implemented in 23 banks as of December 17, 2025, and a digital payments intelligence platform to flag risky transactions and share intelligence for fraud detection.

Customer liability norms

The RBI said it is reviewing its 2017 instructions on limiting customer liability in unauthorised electronic banking transactions, in view of the rapid expansion of digital payment channels and evolving fraud patterns.

"This is expected to improve customer safeguards," the report said.

Cybersecurity, fraud mitigation

The Reserve Bank further said its regulatory and supervisory policies remain focused on reinforcing cybersecurity, mitigating fraud, enhancing customer protection, integrating climate risk awareness, and preserving financial stability as an overarching goal.

Balancing financial innovations with stability, strengthening public trust, and supporting sustainable development will continue to guide the Reserve Bank’s policies going forward, it added.

It also highlighted that frauds present multiple challenges by exposing financial institutions to reputational, operational and business risks, while also weakening customer trust.

During 2024-25, based on the date of reporting by banks, the total number of frauds decreased. However, the amount involved in fraud increased.

"This was mainly due to re-examination and reporting afresh of 122 fraud cases, amounting to Rs 18,336 crore after ensuring compliance with the judgement of the Supreme Court of India dated March 27, 2023," the report said.

Based on the date of occurrence of frauds, during 2024-25, the share of card/internet frauds in the total stood at 66.8% in terms of the number of cases. In terms of amount, the share of advances-related frauds was 33.1 per cent.

In 2024-25, private sector banks accounted for 59.3% of the total number of frauds reported, while public sector banks accounted for 70.7% of the amount involved.

Special drive to clear pending complaints

As part of a customer-centric initiative, the RBI said it will conduct a special two-month campaign starting January 1, 2026, to resolve all grievances pending for more than a month with the RBI Ombudsman.

The central bank is also upgrading its Complaint Management System through CMS 2.0 to improve customer interface and grievance tracking.