Indian central bank tightens rules to curb mis-selling by lenders, bans 'dark patterns'

MUMBAI: The Reserve Bank of India on Monday issued rules to curb mis-selling of financial products by lenders, banning deceptive marketing tactics and tightening norms around customer consent, disclosures and sales practices.

The central bank has banned the use of “dark patterns” in digital interfaces, defining them as design or user-experience techniques that mislead or trick customers into taking actions they did not intend.

Lenders and their agents will now be barred from employing such practices across websites, mobile apps and other sales channels, the RBI said.

The directive follows announcements made by the RBI’s governor in the central bank’s monetary policy review in February.

Lenders must subject their interfaces to periodic audits to identify and remove unfair features, the RBI said.

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The rules form part of amendments to the RBI’s responsible business conduct directions and will come into force from January 1, 2027.

The regulator also laid out a broad definition of mis-selling, which includes practices such as offering products that are unsuitable for the customer, providing misleading or inaccurate information, selling products without obtaining explicit consent from the customer, and mandatorily bundling products together.

“In cases where mis-selling of a financial product/service is established, the bank shall refund the entire amount … and also intimate the customer about cancellation of the sale,” the RBI said.

Banks must obtain clear and informed consent from customers before selling any product, the central bank said. The consent must be recorded and cannot be assumed or pre-selected.

The central bank also prohibited lenders from forcing customers into buying additional products, a practice known as bundling, unless offered or without additional cost.

Among other curbs, banks cannot fund the purchase of financial products from loan proceeds without explicit approval, the RBI said.

Lenders must also disclose key product features, risks, fees and exit terms upfront and design simple ways for customers to opt out of marketing communication, the central bank said in its directives.