RBI announces stricter fraud rules, mis-selling curbs to protect bank users
New Delhi, Feb 6, 2026
The central bank proposed draft rules to curb mis-selling, cap losses from unauthorised digital transactions and tighten recovery practices as part of a wider push to strengthen customer protection
The Reserve Bank of India (RBI) on Friday announced a series of measures aimed at strengthening customer protection, enhancing digital payment safety and curbing mis-selling of financial products, alongside its latest monetary policy decision.
RBI Governor Sanjay Malhotra announced the measures after the Monetary Policy Committee (MPC) meeting held between February 4 and 6, during which the repo rate was kept unchanged at 5.25 per cent.
Measures to strengthen customer protection
As part of a broader push to improve customer safeguards in the financial system, the RBI Governor announced a set of measures aimed at strengthening consumer protection.
According to the Governor, the RBI will issue three draft guidelines covering:
• Mis-selling of financial products
• Recovery of loans and engagement of recovery agents
• Limiting customer liability in unauthorised electronic banking transactions
The central bank has also proposed a framework to compensate customers up to ₹25,000 for losses incurred in small-value fraudulent transactions.
Additionally, the RBI will publish a discussion paper on measures to enhance the safety of digital payments. These may include lagged credits and additional authentication for specific user groups, such as senior citizens.
Steps to promote financial inclusion
In the area of financial inclusion, the RBI has undertaken a comprehensive review of the Lead Bank Scheme (LBS), Kisan Credit Card Scheme, and the Business Correspondent Model. Draft revised guidelines for these frameworks will be issued.
The RBI will also launch a unified reporting portal to improve the management of LBS data.
Some other measures announced are:
• Raising the limit for collateral-free loans to MSMEs from ₹10 lakh to ₹20 lakh
• Allowing banks to lend to REITs, subject to certain prudential safeguards, to promote financing in the real estate sector
Strengthening Urban Cooperative Banks
To strengthen Urban Cooperative Banks (UCBs), the RBI announced four measures. The first two relate to increasing financial limits on unsecured loans and loans to nominal members. The RBI also proposed removing tenor and moratorium-related requirements on housing loans extended by Tier III and Tier IV UCBs.
To enhance managerial and technical capacity, the RBI will launch Mission-SAKSHAM (Sahakari Bank Kshamta Nirman), which aims to train over 140,000 participants from UCBs.
Ease of doing business for NBFCs
To improve ease of doing business for Non-Banking Financial Companies (NBFCs), the RBI announced further regulatory relaxations.
NBFCs with no public funds or customer interface and with asset size not exceeding ₹1,000 crore are proposed to be exempted from the requirement of registration. The RBI also proposed dispensing with the requirement for certain NBFCs to obtain prior approval to open more than 1,000 branches.
Financial markets reforms
The RBI announced the removal of the ₹2.5 trillion investment limit under the Voluntary Retention Route (VRR). Investments under the VRR in each category of securities will, however, remain subject to the respective investment ceilings under the General Route.
In line with the Union Budget 2026–27 announcement, the RBI proposed issuing a regulatory framework for derivatives on corporate bond indices and total return swaps on corporate bonds.
Draft revised guidelines will also be issued for Authorised Dealer banks and stand-alone primary dealers, giving them greater flexibility in undertaking foreign exchange transactions.
Governor Malhotra also announced that draft regulations for External Commercial Borrowings have been finalised and will be notified shortly.
Financial Literacy Week
Governor Malhotra also announced that Financial Literacy Week will be observed from February 9. Continuing the RBI’s re-KYC drive, the theme for 2026 is ‘KYC – Your First Step to Safe Banking’.
The Governor urged all banks to actively participate in the campaign.
[The Business Standard]
