RBI to issue comprehensive norms to prevent mis-selling of financial products & services

Mumbai: The Reserve Bank of India (RBI) will issue comprehensive norms for regulated entities on advertising, marketing and sales practices to curb the mis-selling of financial products and services, according to its Report on Trend and Progress of Banking in India 2024-25 released on Monday.

The central bank said mis-selling by regulated entities has serious consequences for consumers as well as for the financial system. It also proposed reviewing existing instructions on conduct-related matters linked to the engagement of recovery agents and loan recovery, with a view to issuing harmonised guidelines.

On digital fraud, the report said the RBI continues to work with stakeholders, including the Ministry of Home Affairs, to develop and operationalise measures to curb digital and cyber-enabled frauds and strengthen customer protection. Regulated entities have been advised to strengthen internal controls, ensure adequate grievance redress officers at all levels, and improve digital financial literacy.

The RBI highlighted recent initiatives such as MuleHunter.ai, developed to enable system-wide learning to identify and flag potential mule accounts. The tool had been implemented across 23 banks as of December 17, 2025. Another initiative is the Digital Payments Intelligence Platform (DPIP), which leverages artificial intelligence to flag risky transactions and facilitate intelligence-sharing for fraud detection and prevention.

The central bank also said it is reviewing instructions issued in 2017 on the limited liability of customers in unauthorised electronic banking transactions. The review reflects major shifts in the banking landscape, including the emergence of new payment channels, a sharp rise in digital transaction volumes and evolving fraud patterns, and is expected to strengthen customer safeguards.

The RBI reiterated that its regulatory and supervisory policies remain focused on reinforcing cybersecurity, mitigating fraud risks, enhancing customer protection, integrating climate risk awareness and preserving financial stability. Balancing financial innovation with stability, strengthening public trust and supporting sustainable development will continue to guide policy actions.

The report noted that frauds pose reputational, operational and business risks to financial institutions and erode customer trust. During 2024-25, based on the date of reporting by banks, the total number of frauds declined, though the amount involved increased. This was mainly due to the re-examination and fresh reporting of 122 fraud cases amounting to Rs 18,336 crore, following compliance with a Supreme Court judgment dated March 27, 2023.

Based on the date of occurrence, card and internet frauds accounted for 66.8 per cent of cases by number in 2024-25, while advances-related frauds made up 33.1 per cent of the amount involved.

Private sector banks reported 59.3 per cent of fraud cases, while public sector banks accounted for 70.7 per cent of the value involved.