RBI proposes full refunds and stricter rules on mis-selling and dark patterns in financial product sales

The Reserve Bank of India (RBI) has released draft directions aimed at curbing the mis-selling of financial products and eliminating the use of manipulative digital practices, commonly known as dark patterns, by All India Financial Institutions (AIFIs). If implemented, the proposals would mandate 100% refunds for mis-sold products, tighter consent requirements, and stricter oversight of digital interfaces used for selling financial services.

The draft directions, issued for public consultation until 4 March 2026, form part of the RBI’s broader push to strengthen consumer protection, transparency, and accountability across the financial system, particularly as digital sales channels become increasingly dominant.

Focus on dark patterns

A key focus of the draft is the prohibition of dark patterns — design features in digital interfaces that mislead users into making unintended choices. The RBI has directed AIFIs to ensure that their websites, mobile apps and other digital platforms do not employ unfair or deceptive design elements. Institutions will be required to conduct regular user testing and periodic internal audits to identify and eliminate such practices. The draft also aligns AIFIs with the Central Consumer Protection Authority’s 2023 Guidelines on the Prevention and Regulation of Dark Patterns, requiring institutions to comply with future amendments as well.

Mis-selling trend

The draft further mandates clear, explicit and informed customer consent before selling any financial product, whether offered directly by the institution or through a third party. Product bundling—where customers are compelled to buy an additional product or service as a condition for availing another—is expressly prohibited. Where a financial product is linked to a third-party service, customers must be given the freedom to procure that service from an alternative provider.

Post-sale accountability

On post-sale accountability, the RBI has proposed stronger feedback and review mechanisms. AIFIs will be required to seek customer feedback within 30 days of a sale to assess whether the product’s features, costs and risks were adequately explained and understood. In addition, institutions must prepare a half-yearly internal report based on customer feedback and use it to review existing policies and product structures.

The draft lays out clear consequences in cases of mis-selling. Mis-selling has been defined to include selling products unsuitable to a customer’s profile, withholding material information, or forcing bundled purchases. Customers may lodge complaints within the applicable regulatory timelines or, where none are specified, within 30 days of receiving product documents. Upon confirmation of mis-selling, the RBI directs that the AIFI must refund the entire amount paid by the customer and formally cancel the sale, wherever applicable.

Beyond refunds, institutions will also be required to compensate customers for any financial loss arising from mis-selling, in accordance with their approved compensation policies. These provisions are intended to strengthen grievance redressal frameworks and restore customer trust.

The draft also restricts AIFIs from funding the purchase of any product, either their own or a third party’s, through loans or credit facilities without explicit customer consent. Further, the RBI has cautioned against incentive structures that encourage aggressive sales over customer suitability. Employees engaged in sales or marketing must not receive direct or indirect incentives from third parties.

Industry experts say the proposed rules, if finalised, could significantly raise compliance standards and align India’s financial consumer protection framework with global best practices, especially in the context of digital-first financial services. Stakeholders have been invited to submit comments on the draft before the consultation window closes in March 2026.