In its first monetary policy for 2026, the Reserve Bank of India (RBI) kept the repo rate unchanged and shifted its attention to customer protection, proposing a set of measures aimed at making the financial system safer, fairer and more accountable for consumers.
Over the years, there has been a steady rise in complaints related to mis-selling of financial products, harsh loan recovery practices and unauthorised digital transactions. The latest policy response seeks to address these issues through tighter conduct rules, clearer liability frameworks and preventive safeguards.
Curbing mis-selling
One of the most significant proposals is the introduction of comprehensive instructions on advertising, marketing and sale of financial products and services by regulated entities such as banks and non-banking financial companies (NBFCs). These norms will also cover third-party products, including insurance and investment products sold at bank counters.
This will ensure that products offered to customers are suited to their needs and risk appetite, with key features, costs and risks clearly disclosed. Mis-selling has often occurred where incentives are misaligned or disclosures are inadequate. The new framework is expected to bring uniform standards of accountability across institutions. Adhil Shetty, CEO of BankBazaar, notes that regulators globally are sharpening their focus on this issue. “Across global financial markets, regulators are placing greater emphasis on customer protection as financial services become more digital and complex. Measures aimed at curbing mis-selling bring greater transparency and fairness into the system,” he said.
Loan recovery norms
RBI also announced a review and harmonisation of rules governing loan recovery practices and the engagement of recovery agents. At present, different categories of regulated entities follow different conductrelated instructions. Under the proposed changes, RBI will bring these rules under a common conduct framework, making it easier to monitor and enforce fair recovery practices. This is important as complaints about harassment and coercive tactics have remained persistent.
The move will bring clarity to what constitutes acceptable recovery behaviour and where clear red lines exist, strengthening customer dignity while preserving lenders’ ability to recover dues lawfully.
Fraud compensation
Another major reform is the review of the framework for limiting customer liability in unauthorised electronic banking transactions. The existing rules were issued in 2017, well before UPI, instant payments and mobile banking became mainstream.
Given the scale and speed of digital transactions today, a formal compensation framework for small-value fraudulent transactions is in the works. Under this proposal, customers could be compensated up to Rs.25,000 for losses arising from such frauds, subject to conditions.
This marks a critical shift. Until now, customers often bore losses due to delayed reporting or ambiguity over responsibility between banks and payment platforms. According to Shetty, this signals a broader change in regulatory thinking. “The proposal to compensate customers for losses arising from small-value fraudulent transactions is particularly significant. It acknowledges that digital fraud is a systemic risk and not merely an individual failure,” he said.
Digital payment safety
Beyond compensation, RBI also plans to publish a discussion paper on strengthening safety in digital payments. The paper will explore calibrated safeguards such as lagged credits and additional authentication for vulnerable users, including senior citizens. These measures are aimed at preventing fraud before money leaves the system, rather than relying solely on post-transaction grievance redressal.
Kunal Varma, Founder and CEO of Freo, an app for UPI, loans, and insurance, said, “As digital payments continue to grow across India, strengthening safety and customer protection becomes increasingly important. The RBI’s proposal to introduce these safeguards will reduce fraud especially for users who may be more vulnerable.”
