Insurance should be recommended only based on the customer’s needs and financial capacity, and must comply with all applicable IRDAI rules. Under the RBI’s Wealth Management, Marketing and Distribution guidelines (28 June 2013), banks may distribute insurance as a third‑party product, but must clearly disclose that the policy is not a bank deposit and is not guaranteed by the bank. Banks must obtain the customer’s explicit, separate consent before selling any policy.
Under RBI’s latest directions on third‑party product sales (Responsible Business Conduct framework, 2026), banks must not condition loans, deposit accounts, or any other banking service on the purchase of insurance, and compulsory bundling is prohibited. Banks must not use coercion, false promises, incomplete disclosures, misleading digital practices, or “dark patterns,” and must ensure that insurance agents in branches are clearly identifiable and do not present themselves as bank employees.
Banks must explain the premium, benefits, exclusions, risks, lock‑in/exit penalties, the bank’s role, any commissions or charges, and the complaint‑redressal process, and must assess product suitability (age, income, risk profile, financial literacy, investment horizon) before recommendation. Consent must be explicit (e.g., OTP, digital confirmation, or signed declaration), with a default “No” option and separate approval for each product.
If forced selling or mis‑selling is detected—defined to include selling unsuitable products, incomplete/misleading information, sale without explicit consent, or compulsory bundling—the bank must investigate, provide a full refund of the premium (and compensation where applicable), cancel the sale where feasible, and take disciplinary action against responsible officials. These norms apply to bancassurance and other third‑party products sold through branches, apps, and agents, with key provisions effective from 1 January 2027.
