Financial product mis-selling: It's time to close all gaps

The Reserve Bank of India (RBI) recently issued draft amendments to its Responsible Business Conduct Regulations.

- DEEPTI GEORGE & AVIGYAN MITRA

These cover the advertising, marketing and sales of financial products and services by banks, non-bank financial companies and other all-India financial institutions either by their own staff or by direct sales or marketing agents.The most consequential element in RBI's proposals is that for the first time they define 'mis-selling' to include any sale of a product or service that is neither suitable nor appropriate for a customer profile even with customer consent. Providing incomplete, inaccurate or misleading information, compulsorily bundling products or engaging in dark patterns will also constitute mis-selling.

The fact that consumer consent alone will not be enough to defend a sale dismantles one of the industry's most cynically deployed defences against consumer complaints. RBI's prohibition on compulsory bundling is equally significant. Tying insurance policies to loan disbursals, unit-linked insurance policies to locker access or mutual funds to savings accounts has been one of the most systematic forms of financial mis-selling in India. Provisions against dark patterns—or interfaces designed to trick or manipulate online users into action—were overdue. False urgency, drip pricing, subscription traps, pre-ticked boxes and trick wording are named explicitly.