New RBI rules to stop mis-selling and compulsory bundling by banks from January 2027: 4 key points

It is a common practice across banks to force or trick unsuspecting customers into buying third-party products and services (TPPS) to avail the bank's own products and services. For instance, some banks persuade home loan customers to buy term insurance policies from their sister companies. In many cases, banks even issue fresh loans to finance such policies, putting the customers into an endless loop of debt. These practices may end soon.

Come January 1, 2027, banks must implement new RBI directions that prohibit them from compulsory bundling of third-party products and services.

RBI defines compulsory bundling as "the practice by a bank of making availment of one product/service by a customer conditional upon availment of another product/service, whether own or third-party, offered by the bank.”

On Monday, June 15, 2026, the RBI issued Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Second Amendment Directions, 2026. These amendments introduce several customer-focused measures into the Reserve Bank of India (Commercial Banks - Responsible Business Conduct) Directions, 2025. And they will come into effect from the New Year 2027.

Four key points

There are four key measures included in the directions that will greatly help bank customers, provided they are strictly implemented.

"A bank shall not resort to compulsory bundling of any TPPS with any of its own product/service," RBI said.

In case a third-party product or service is required as a risk mitigant, then customers should be allowed to buy it from anywhere.

For instance, banks often ask customers to buy a term plan to back their home loan. In such cases, customers should get the choice to buy such a plan from anywhere, as per the new directions.

"However, if the sale of the bank’s own product/service is contingent on the purchase of a TPPS as a risk mitigant, the customer shall be provided the option to purchase the same from any TPPS Provider. Further, offering of multiple products/services as a package based on voluntary consent from the customer and/or on complimentary basis (i.e., without any additional direct or indirect cost to the customer) shall not be construed as compulsory bundling," RBI said.

"A bank shall not fund the purchase of a product/service by a customer, whether of its own or of a third-party, out of any loan facility sanctioned to the customer without her / his explicit consent," RBI said.

Further, the RBI's directions have asked banks to "establish a mechanism to seek feedback from customers, within a period of 30 days from the sale of any financial product/service to ensure that customers have understood the features of the financial product/service and also the risks associated with such financial product/service."

A customer can lodge a complaint regarding the mis-selling of a financial product/service with the bank within the timeline specified by the respective financial sector regulators, according to the central bank.

"In cases where no such timeline has been specified, customers can lodge complaint within 30 days of receiving the signed copy of the terms and conditions/agreement," RBI said.

The new directions make it mandatory for banks to refund the sale amount if mis-selling has been established.

"In cases where mis-selling of a financial product/service is established, the bank shall refund the entire amount paid by the customer for purchase of the financial product/service and also intimate the customer about cancellation of the sale, wherever applicable. Further, the bank shall also compensate the customer, for any loss arising due to misselling, as per its approved policy," RBI said.