The Reserve Bank of India (RBI) has issued draft amendments to the Urban Co-operative Banks (UCBs)-Responsible Business Conduct and Undertaking of Financial Services Directions, proposing stricter norms on marketing practices and third-party product distribution.
Under the proposed Responsible Business Conduct framework, effective July 1, 2026, UCBs will be required to obtain explicit and documented customer consent before selling any financial product or service.
The draft directions prohibit compulsory bundling of products and mandate assessment of suitability and appropriateness prior to sale. Mis-selling has been clearly defined and barred, along with the use of deceptive digital “dark patterns.”
The draft also mandates transparent disclosure of interest rates, fees and charges, easy opt-out from marketing communications, and stronger oversight of Direct Selling and Marketing Agents (DSAs/DMAs). In cases where mis-selling is established, banks will be required to refund the entire amount collected and compensate customers for losses, as per their approved policy.
Separately, under amendments to the Undertaking of Financial Services Directions, effective April 1, 2026, UCBs may distribute mutual funds, undertake insurance business as corporate agents, provide National Pension System (NPS) services, and offer online trading facilities subject to RBI approval. Such activities must be carried out strictly on a fee basis without any risk participation, with upfront disclosure to customers and compliance with applicable SEBI, IRDAI and PFRDA regulations.
The RBI has invited public comments on the draft directions until March 4, 2026.