RBI signals stronger customer safeguards; proposes draft guidelines on mis‑selling

Sanjay Malhotra, Governor, RBI

• RBI to release draft guidelines on mis-selling, loan recovery, and customer protection
• New framework to compensate up to Rs 25,000 for small-value digital fraud losses
• Discussion paper planned to enhance safety in digital payments platforms

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The Reserve Bank of India (RBI) on February 6 emphasised fresh steps to bolster customer protection across financial services, unveiling plans for three separate draft guidelines.

Addressing concerns around product mis‑selling, Malhotra said the central bank will shortly issue a draft guideline on mis‑selling practices, aimed at tightening disclosure norms and ensuring customers receive clear, fair information before purchasing financial products.

In addition, the RBI will release a draft framework on loan recovery and the conduct of recovery agents. This is expected to set boundaries around engagement practices and curb aggressive or unethical behaviour by third‑party agents.

Another key proposal relates to limiting customer liability in unauthorised electronic banking transactions. The RBI is looking to define clearer principles for banks to follow when resolving fraud disputes for customers.

Malhotra also flagged a new small‑value fraud compensation mechanism. “We propose a framework that would compensate customers up to Rs 25,000 for losses in small‑value fraudulent digital transactions,” he said, underlining the need to build greater trust in digital payment systems.

There is a framework which we will be taking out for compensation of small frauds because we have observed while in value, they constitute small proportion, but in numbers 65 percent have less than Rs 55,000 in terms of amount.

The draft will be out shortly, said Sanjay Malhotra during the post-MPC presser.

On the broader digital payments landscape, the RBI plans to publish a discussion paper on enhancing safety across payment platforms. Potential measures under consideration include lagged credits and additional authentication requirements for certain user segments such as senior citizens.

“These steps are part of our continued efforts to empower customers and strengthen the digital payments ecosystem,” Malhotra added.