RBI Issues Comprehensive Directions on Advertising, Marketing & Sale of Financial Products by Payments Banks — Effective January 1, 2027
The Reserve Bank of India has taken a significant regulatory step by issuing the Reserve Bank of India (Payments Banks – Responsible Business Conduct) Second Amendment Directions, 2026, establishing a structured and enforceable framework governing how Payments Banks conduct advertising, marketing, and sale of financial products and services to their customers. Issued vide circular RBI/2026-27/117, DOR.MCS.REC.No.96/01-01-034/2026-27 dated June 15, 2026, these Directions will come into force on January 1, 2027, and amend the parent Reserve Bank of India (Payments Banks – Responsible Business Conduct) Directions, 2025.
These Directions derive their authority from Section 35A of the Banking Regulation Act, 1949, which empowers the Reserve Bank to issue binding instructions in public interest.
Background and Regulatory Context
Previously, Payments Banks (referred to hereafter as "PBs") were governed by certain customer appropriateness and suitability norms embedded within the Reserve Bank of India (Payments Banks – Undertaking of Financial Services) Directions, 2025. Following a comprehensive review of these instructions, the RBI concluded that a more detailed and consolidated regulatory framework was warranted — one that specifically addresses the promotion, sale, and marketing of both proprietary and third-party financial products and services.
The 2026 Directions fill this gap by introducing new definitions, operational standards, conduct requirements, and consumer protection mechanisms across the entire product distribution ecosystem of Payments Banks.
Key Definitions Introduced
The Amendment Directions insert several new defined terms into paragraph 4 of the parent Directions. These definitions are foundational to understanding the compliance obligations created by the framework.
Compulsory Bundling
Sub-paragraph 4(4A) defines compulsory bundling as the practice by a PB of conditioning the availment of one product or service by a customer upon the simultaneous purchase of another product or service — whether belonging to the PB itself or to a third party.
Dark Pattern
Sub-paragraph 4(7.1A) defines a dark pattern as any deceptive design practice or user interface/user experience manipulation on any platform that is intended to mislead or trick users into taking actions they did not originally intend, thereby subverting consumer autonomy, decision-making, or choice — amounting to misleading advertisement, unfair trade practice, or violation of consumer rights.
Direct Selling Agent (DSA) / Direct Marketing Agent (DMA)
Sub-paragraphs 4(7B) and 4(7C) introduce definitions for DSAs/DMAs and their sub-agents. A DSA/DMA is any entity or individual — other than a PB's own employee — engaged by a PB (regardless of the contractual label used, such as Business Correspondent) to sell, market, promote, or influence customers towards purchasing products or services. A DSA/DMA sub-agent is an individual engaged by a DSA/DMA who operates at the customer interface level. The Directions also clarify that individuals directly engaged by a PB under outsourcing arrangements for marketing activities are subject to all DSA/DMA-related instructions.
Explicit Consent
Sub-paragraph 4(8A) defines explicit consent as a specific, informed, and unambiguous indication of a customer's choice, expressed through a recorded or documented statement or a clear affirmative action, that signals agreement to a particular action or arrangement with a PB.
Mis-Selling
Sub-paragraph 4(10A) defines mis-selling to include:
- Sale of a product or service that is unsuitable or inappropriate for the customer's profile, even if explicit consent was obtained
- Sale without providing correct or complete information, or by providing misleading information
- Sale without the customer's explicit consent
- Compulsory bundling of another product or service with the requested one
- Any other conduct defined as mis-selling by the relevant financial sector regulator
Third-Party Product or Service (TPPS)
Sub-paragraph 4(13A) defines a TPPS as any product or service offered by a PB to its customers on behalf of a third-party provider, under an agency business or referral services arrangement as permitted by the Reserve Bank of India (Payment Banks – Undertaking of Financial Services) Directions, 2025.
New Chapter: Advertising, Marketing and Sale of Financial Products/Services
The Directions introduce an entirely new section — Section E — within Chapter III on 'Customer Guidance and Protection', inserted after paragraph 42 of the parent Directions. This section spans from paragraph 42A to 42ZA and covers six distinct areas.