RBI’s 2026 Amendments on Banks’ Financial Services: New Regime for Agency & Referral Activities

The Reserve Bank of India has overhauled the regulatory landscape for commercial banks that undertake agency business and referral services for third-party financial products. Through the Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Third Amendment Directions, 2026, the central bank has laid down a more granular compliance framework that will apply from 1 January 2027.

These amendments significantly reshape how banks can distribute or refer regulated financial products and services, clarify roles and responsibilities of banks vis-à-vis third-party product and service providers (TPPSP), and integrate conduct and customer protection aspects with the forthcoming Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Directions, 2025.

This article provides a structured and practical overview of the changes, their legal basis, and what commercial banks and their group entities need to realign before the effective date.

Statutory Basis and Background of the Amendments

The Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Third Amendment Directions, 2026 have been issued under the powers vested in the RBI by Section 35A of the Banking Regulation Act, 1949. The RBI has recorded its satisfaction that these changes are required in the public interest, primarily to:

  • Streamline the regulatory regime for agency business and referral services;
  • Bring uniformity in treatment of third-party product distribution across banks;
  • Anchor customer service and conduct obligations under a single master set of directions, namely the Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Directions, 2025.

The amendments modify the previously issued Reserve Bank of India (Commercial Banks — Undertaking of Financial Services) Directions, 2025 (referred to as the Master Direction), especially in relation to distribution, marketing and referral of third-party financial products.

Effective Date and Scope

Commencement

The amendments are formally titled:
“Reserve Bank of India (Commercial Banks ­Undertaking of Financial Services) Third Amendment Directions, 2026.”

These Directions:

  • Will come into force on 1 January 2027;
  • Apply to commercial banks and, where specified, their group entities;
  • Cover agency business and referral services concerning regulated financial products and services.

Note: While these Directions primarily address the regulatory architecture for banks’ third-party engagements, the customer-facing and conduct-related norms are to be read together with the Reserve Bank of India (Commercial Banks – Responsible Business Conduct) Directions, 2025.

Key Conceptual Changes: Updated Definitions

The amendments significantly refine the terminology used in the Master Direction. Understanding these revised definitions is critical for designing compliant structures and contracts.

Redefined “Agency Business”

The term “Agency Business” in paragraph 4(1) of the Master Direction has been substituted. Under the amended framework, agency business means:

  • An arrangement where a bank or its group entity acts as an agent of a third-party product or service provider (TPPSP);
  • The bank acts without any risk participation;
  • The purpose is to facilitate the sale of the TPPSP’s financial products or services (e.g., insurance, mutual fund, pension fund, etc.) to the bank’s own customers.

Activities under such agency business may include, among others:

  • Marketing and promotion of the TPPS;
  • Sales activities;
  • Acting as the initial point of contact for customer grievances; and
  • Providing after-sale services relating to the product or service.

In essence, under agency business the bank plays an active role in distributing third-party financial products, though strictly on a fee basis and without underwriting or bearing risk on the product itself.

Reworked “Referral Services”

Paragraph 4(17) of the Master Direction has been replaced with an updated definition of “Referral Services”. As per the new definition:

  • The bank may refer its customers to a TPPSP by sharing or making available information about the financial products or services offered by that TPPSP;
  • Banks can undertake only those third-party products or services under the referral route where there is no ongoing customer interaction by the bank, meaning:
    • No distribution function;
    • No grievance redressal role;
    • No post-sales servicing.

Thus, under referral services, the bank’s role is restricted to marketing and referral only – not product sale or servicing.

Introduction of “Regulated Financial Products and Services”

A new sub-para (17A) has been inserted in paragraph 4 to define “Regulated financial products and services”.