RBI Issues Sweeping Consumer Protection Rules for NBFCs: Responsible Business Conduct Second Amendment Directions, 2026
The Reserve Bank of India has introduced a far-reaching regulatory overhaul governing how Non-Banking Financial Companies advertise, market, and sell financial products and services to their customers. Issued vide circular RBI/2026-27/123, DOR.MCS.REC.No.102/01-01-039/2026-27 dated June 15, 2026, the Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Second Amendment Directions, 2026 amend the principal Reserve Bank of India (Non-Banking Financial Companies – Responsible Business Conduct) Directions, 2025 and will come into force on January 1, 2027.
The impetus for this regulatory intervention lies in the RBI's recognition that existing instructions on customer appropriateness and suitability — issued under the Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Directions, 2025 — needed to be expanded into a comprehensive, standalone framework addressing the full lifecycle of financial product promotion and distribution.
Important: The Directions are applicable to all NBFCs, except Core Investment Companies, NBFC-Account Aggregators, Non-Operative Financial Holding Companies, and NBFCs with no direct customer interface.
The Amendment Directions are issued in exercise of powers conferred under Sections 45JA, 45L and 45M of the Reserve Bank of India Act, 1934, with the RBI being satisfied that it is necessary and expedient in public interest to issue these directions.
Expanded Applicability: New Entities Covered Under Chapter IIIA
A notable structural change introduced by this Amendment is the insertion of paragraph 4A, which extends the provisions of the newly introduced Chapter IIIA (dealing with Advertising, Marketing and Sale of Financial Products/Services) to three additional categories of entities:
- NBFC-P2P entities registered with the RBI under the provisions of the RBI Act, 1934
- Mortgage Guarantee Companies registered under the scheme of Registration of Mortgage Guarantee Companies
- Standalone Primary Dealers registered with the RBI as NBFCs under the RBI Act, 1934
This extension ensures that the consumer protection principles embedded in Chapter IIIA are not confined to mainstream NBFCs but permeate across specialised financial intermediaries that similarly engage in customer-facing financial activities.
Key Definitions Introduced
The Amendment inserts several critical definitions into paragraph 6 of the principal Directions, each designed to close regulatory gaps and provide a clear conceptual basis for enforcement.
Compulsory Bundling
"Compulsory bundling means the practice by an NBFC of making availment of one product / service by a customer conditional upon availment of another product / service, whether own or third-party, offered by the NBFC." — paragraph 6(1A)
Dark Pattern
"Dark pattern means any practices or deceptive design pattern using user interface or user experience interactions on any platform that is designed to mislead or trick users to do something they originally did not intend or want to do, by subverting or impairing the consumer autonomy, decision making or choice, amounting to misleading advertisement or unfair trade practice or violation of consumer rights." — paragraph 6(2A)
Direct Selling Agent / Direct Marketing Agent (DSA/DMA)
"Direct Selling Agent (DSA) / Direct Marketing Agent (DMA) means an entity or individual (other than an NBFC's own employee) engaged by an NBFC, irrespective of the contractual designation / nomenclature used for such engagement (such as Loan Service Provider (LSP), etc.), to sell or market / promote / influence customers for purchase of its own or third-party product / service." — paragraph 6(2B)
A DSA/DMA sub-agent under paragraph 6(2C) is an individual engaged by a DSA/DMA to carry out selling or marketing activities at the point of customer interface. Where an individual is directly engaged by an NBFC under an outsourcing arrangement for such activities, the instructions applicable to both DSA/DMA and DSA/DMA sub-agents apply to such individual.
Explicit Consent
"Explicit consent means a specific, informed and unambiguous indication of an individual's choice, given through a duly recorded / documented statement or clear affirmative action, which indicates agreement to a specific action by or arrangement with an NBFC." — paragraph 6(4A)
Mis-selling
One of the most consequential definitions introduced, paragraph 6(9A) defines mis-selling as the sale of a financial product or service — whether own or third-party — in any of the following circumstances:
- Sale of a product/service that is neither suitable nor appropriate for the customer's profile, even with the customer's explicit consent
- Sale without providing correct or complete information, or by furnishing misleading information
- Sale without the customer's explicit consent
- Compulsory bundling of another product/service with the requested product/service
- Sale involving any other element defined as mis-selling by the relevant financial sector regulator
Third-Party Product or Service (TPPS)
"Third-party Product or Service (TPPS) means a product or service offered by an NBFC to its customers on behalf of a third-party product / service provider (TPPS Provider) after entering into an agency business or referral services arrangement with the TPPS Provider as permitted under Reserve Bank of India (Non-Banking Financial Companies – Undertaking of Financial Services) Directions, 2025." — paragraph 6(13)