RBI’s Draft 2026 Amendment Directions on Responsible Business Conduct for Rural Co-operative Banks – Detailed Overview

The Reserve Bank of India has proposed significant changes to the framework governing how Rural Co-operative Banks (RCBs) promote, market, and sell financial products and services. These changes are contained in the Draft Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Amendment Directions, 2026, issued under Sections 35A and 56 of the Banking Regulation Act, 1949.

These Amendment Directions are slated to take effect from July 1, 2026, and will modify the existing Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Directions, 2025. The objective is to strengthen customer protection, regulate sales conduct, curb mis-selling and dark patterns, and ensure that RCBs and their agents market and sell financial products in a transparent and fair manner.

1. Statutory Basis and Effective Date

  • The Reserve Bank has invoked its powers under Sections 35A and 56 of the Banking Regulation Act, 1949.
  • The amendments are titled “Reserve Bank of India (Rural Co-operative Banks – Responsible Business Conduct) Amendment Directions, 2026”.
  • These Directions are proposed to come into force on July 1, 2026.
  • They operate as modifications to the existing Directions, 2025, and must be read in conjunction with them.

2. Key New Definitions Introduced

The Amendment Directions insert several important definitions into paragraph 4 of the 2025 Directions. These are central to understanding the scope of compliance.

2.1 Compulsory bundling – 4(5A)

Compulsory bundling is described as a situation where:

  • An RCB makes the availing of one product or service conditional on the customer availing another product or service (whether the second product is of the RCB itself or of a third party).

However, the following are not treated as compulsory bundling:

  • Offering multiple products or services together as a package, where:
    • The customer gives voluntary consent, and/or
    • The additional product/service is complimentary, i.e., there is no extra direct or indirect cost to the customer.

2.2 Dark pattern – 4(9B)

A dark pattern is defined as:

  • Any deceptive design or practice in user interface (UI) or user experience (UX) on any platform,
  • Intended to mislead, trick or manipulate users into doing something they did not originally intend,
  • Which undermines or weakens consumer autonomy, decision-making, or choice,
  • And amounts to misleading advertisement, unfair trade practice, or violation of consumer rights.

2.3 Direct Selling Agent (DSA) / Direct Marketing Agent (DMA) – 4(9C)

  • A DSA / DMA is any agent or agency engaged by an RCB to sell or market either the RCB’s own products/services, or third-party products/services.

Explicit consent is:

  • A specific, clear and informed signal of a person’s choice,
  • Expressed through a statement or an unambiguous affirmative action,
  • Giving agreement to a particular action or arrangement with an RCB, and
  • Properly recorded or documented by the RCB.

2.5 Mis-selling – 4(19A)

Mis-selling in relation to any financial product or service (own or third-party) covers, illustratively:

  1. Selling a product/service that is neither suitable nor appropriate for the customer’s profile, even if explicit consent is obtained.
  2. Selling without providing correct or complete information, or by giving misleading information.
  3. Selling a product/service without explicit consent of the customer.
  4. Forcing a second product/service as a compulsory bundle with a requested product/service.
  5. Any other instance recognized as mis-selling by the concerned financial sector regulator.

2.6 Third-party financial product or service – 4(25A)

A Third-party Financial Product or Service is:

  • Any product/service offered by an RCB on behalf of a third party,
  • Under an agency, referral, or any similar arrangement,
  • To the RCB’s own customers.

3. New Chapter IV Insertions – Customer Guidance and Protection

In Chapter IV, after paragraph 79, a new segment “E. Advertising, Marketing and Sales of Financial Products / Services by RCBs” is introduced, setting comprehensive behavioural and procedural norms.

4. Policy Framework Requirements – 79A and 79B

4.1 Internal policy on advertising, marketing and sales – 79A

Each RCB must adopt a comprehensive written policy that covers:

  • Advertising, marketing and selling of its own products and third-party products.
  • Criteria and processes for assessing suitability and appropriateness of products/services for customers.
  • A structured feedback system for post-sale review.
  • Grounds and process for compensating customers in cases of mis-selling.

4.2 Policy for DSAs / DMAs – 79B

Where DSAs/DMAs are engaged, the RCB’s policy must also address: