Financial Mis-selling in India: RBI, SEBI, IRDAI & NRI Remedies

Part of Banking & Financial Disputes: UAE & India – the overview that links the banking-recovery and mis-selling guides across the UAE and India.

In India, mis-selling is the sale of a financial product that is unsuitable, misrepresented, sold without informed consent, or forced as a bundle – most visibly insurance sold with loans (bancassurance) and complex unit-linked, structured and portfolio products. The regulators are tightening: the RBI‘s new responsible-conduct rules (effective 1 January 2027) ban “dark patterns” and define mis-selling; the IRDAI has extended the free-look to 30 days and treats mis-selling as a priority; and SEBI holds investment advisers to a best-interest standard. Remedies run through the RBI Integrated Ombudsman, the Insurance Ombudsman, SEBI’s SCORES and ODR portals, and the consumer commissions. For wealthy Indians and NRIs banking in the UAE, a parallel UAE route usually matters too – and is covered alongside.

Financial mis-selling in India at a glance

• What it is – unsuitable, misrepresented, non-consensual or force-bundled financial products
• The hot area – bancassurance and insurance forced with loans; the RBI’s 2027 conduct rules (a “dark patterns” ban)
• Insurance – IRDAI’s 30-day free-look (2024); mis-selling a stated priority; the Bima Bharosa portal and the Insurance Ombudsman
• Securities – SEBI investment-adviser duties; complaints via SCORES and the SMART ODR portal
• Banking – the RBI Integrated Ombudsman: from 1 July 2026 the 2026 scheme (up to ₹30 lakh for consequential loss, ₹3 lakh for harassment); the 2021 scheme (₹20 lakh / ₹1 lakh) governs complaints filed until 30 June 2026; free
• Consumer route – Consumer Protection Act 2019 commissions: District up to ₹50 lakh, State to ₹2 crore, National above
• UAE corridor – Indians and NRIs sold products through UAE private banks and advisers: which law, which forum, and how the routes interact

First triage – is this mis-selling, and where does it go?

• The product and seller – what was sold, and by which bank, insurer, broker, distributor or adviser; and whether it is Indian-regulated or offshore.
• The dates – when it was sold, and when the loss became clear; the free-look and limitation clocks run from here.
• The record – the surrender or current value, the complaint history, and any governing-law or forum clause.
• The route – RBI, IRDAI or SEBI; the ombudsman, the consumer commission, or the courts.
• A UAE or offshore element – was the advice given, or the product booked, through UAE private banking? If so, the UAE page applies alongside.

This is general guidance, not advice on a specific case.

1. What mis-selling means under Indian law

Indian law approaches mis-selling through conduct and consumer-protection principles rather than a single statute. The recurring forms are a product unsuitable for the customer’s needs or risk profile; misrepresentation or suppression of material facts – returns, charges, lock-ins or that a “deposit” is in fact an insurance policy; churning of policies or portfolios to earn commission; and forced or mandatory bundling, where one product is made a condition of another. The RBI’s new conduct rules put this into words for lenders, defining mis-selling to include selling products that are unsuitable, giving misleading information, selling without the customer’s explicit consent, and mandatorily bundling products. The thread is the same as elsewhere: the wrong is in how the product was sold, not merely that it underperformed.

2. Where it happens – bancassurance, ULIPs and complex products

The Indian battlegrounds are well known. Bancassurance – banks selling insurance across the counter – is one of the most visible and recurring complaint areas, often where a borrower is steered into a policy alongside a loan. Unit-linked insurance plans (ULIPs) and traditional “savings” policies are sold as investments without their costs and lock-ins being clear. Beyond insurance, mutual funds, portfolio management schemes (PMS), structured products and credit add-ons (loan-protection insurance, packaged cards) generate suitability and disclosure disputes, as do alternative investment funds (AIFs) and portfolio units placed with wealthy investors. A distinct and growing problem is unregistered advice – “finfluencers” and others giving investment recommendations in the guise of education. For higher-net-worth clients the issues mirror the UAE – complex, high-commission products sold without a proper suitability assessment – which is why the cross-border picture matters.

3. The three regulators and their conduct rules

India regulates conduct through three authorities. The Reserve Bank of India (RBI) governs banks, NBFCs and other regulated lenders; its Responsible Business Conduct framework was tightened by new rules – issued in 2026 and effective 1 January 2027 – that ban “dark patterns” (drip pricing, subscription traps and forced actions), require upfront disclosure of features, risks, charges and exit terms, and mandate periodic audits of digital sales journeys. These directions were issued across several categories of RBI-regulated entity – commercial, small-finance, payments and co-operative banks, NBFCs, housing-finance companies and all-India financial institutions among them – so the applicable direction should be checked against the particular seller. The IRDAI regulates insurers: its Protection of Policyholders’ Interests Regulations 2024 extended the free-look period to 30 days, and it has repeatedly flagged mis-selling as a significant concern. SEBI regulates the securities market and holds registered investment advisers to a best-interest, suitability-based standard; since 2025 it has also moved firmly against unregistered “finfluencer” advice, barring its regulated intermediaries from associating with unregistered influencers. Together they set the conduct benchmark against which a mis-selling claim is measured.

4. The complaint and forum map

The right door depends on the product. For a bank, NBFC or other RBI-regulated entity product, the customer complains to the institution and then escalates to the RBI Ombudsman through the RBI complaint portal, free of charge. The Reserve Bank – Integrated Ombudsman Scheme 2021 governs complaints filed up to 30 June 2026 (compensation up to ₹20 lakh for the direct loss, plus up to ₹1 lakh for time, expense and harassment); from 1 July 2026 the Reserve Bank – Integrated Ombudsman Scheme 2026 applies, raising the ceiling to ₹30 lakh for consequential loss and ₹3 lakh for harassment, mental anguish, time and expense. The route and limits should be checked against the scheme in force on the filing date. For insurance, the route is the insurer’s grievance cell, the Bima Bharosa portal and the Insurance Ombudsman. For securities and advisers, complaints go through SEBI’s SCORES portal and, where the dispute falls within the framework, the SMART ODR platform for online conciliation and, if unresolved, arbitration – though ODR is not a universal route for every investment loss: its availability depends on the party, the product and the dispute type, and on whether the matter is already before a court, tribunal, consumer forum or arbitral process. Across all of them, the Consumer Protection Act 2019 offers a parallel route, treating financial services as a “service”: the District Commission hears claims where the consideration paid is up to ₹50 lakh, the State Commission up to ₹2 crore, and the National Commission above that.

A regulator complaint – to the RBI, SEBI or IRDAI – can prompt supervisory action but does not itself award you compensation; for money back, the ombudsman, consumer-commission or court routes apply.

5. Bancassurance and “forced” insurance – the current focus

A prominent current issue is insurance sold through banks, particularly where it is tied to a loan. The pattern is familiar: a borrower is told, or led to believe, that a life or general policy is required to secure the facility, or a “savings” product is presented as a deposit. The RBI’s new conduct rules target exactly this – barring the sale of products without explicit consent and the mandatory bundling of one product with another, and requiring that any linked insurance be genuinely optional and clearly disclosed. For the customer, the evidence is in the loan file and the sales record: what was presented as a condition, what consent was actually given, and whether the policy was ever suitable. Where the same customer faces the lender’s recovery action, the banking-disputes side runs alongside.

6. Building a claim – suitability, free-look and time limits

As in the UAE, an Indian mis-selling claim is documentary, built from the application and “needs analysis”, the disclosure and benefit illustration, the sales communications, and the gap between what was promised and what was issued. The first and simplest remedy is the free-look period – under the IRDAI’s 2024 framework, 30 days from receipt for eligible life policies (a term of a year or more) and eligible individual health policies – within which a policy can be returned for a refund, subject to permitted deductions (such as proportionate risk premium, medical-examination cost and stamp duty) and to the product class and current regulatory wording. Beyond that, timing is governed by the relevant forum: consumer complaints generally carry a two-year limitation from the cause of action, the ombudsman schemes have their own filing windows, and civil claims follow the Limitation Act. Acting early preserves both the free-look option and the evidence.

The documents to collect. A claim is usually built from the account-opening and KYC forms; the risk profile and suitability or needs-analysis; the proposal form, benefit illustration and product brochure; the policy schedule; account and valuation statements and any surrender value; call recordings, emails and messaging; commission and fee disclosures; and the complaint correspondence. Gathering these before anything is surrendered, switched or settled is often decisive.

7. What decides a mis-selling claim in India

A handful of points tend to decide these cases, and they are easy to miss.

Advice or mere sale. Much Indian mis-selling happens through a bank relationship manager who is trusted as an adviser even though the institution treats the transaction as a simple sale. What was actually represented to the customer – and the trust the institution invited – can matter as much as the form that was signed.

A signature is not the end of it. Customers are routinely asked to sign standard-form declarations, consents and risk acknowledgments. These do not automatically defeat a complaint: a signed consent is significant evidence, but not necessarily conclusive. Consumer-protection law guards against unfair, one-sided terms, and what matters is whether the signed record reflects a genuinely informed sale – the explicit, understood consent the RBI’s conduct rules now require. What the customer actually understood is the real question.

Risk-profile mismatch. A gap between the customer’s recorded objectives and risk appetite and the risk of what they were sold is strong evidence of unsuitability – most starkly where a conservative saver was placed in a market-linked or illiquid product.

The commission and the incentive. Distribution and bancassurance commissions are a recurring driver of mis-selling. A product pushed because it paid the seller well – especially where that was not disclosed – supports both a complaint and the unfairness now targeted by the conduct rules. High commission alone is not mis-selling, though: it has to be tied back to unsuitability, non-disclosure or the absence of genuine consent.

Hedge or speculation. For companies and SMEs sold exotic FX or other derivatives, the dividing line is whether the contract genuinely hedged a real exposure or amounted to disguised speculation beyond the business’s needs – a question of suitability, of the company’s capacity to enter the contract, and of how the product was explained.

Regulatory breach. Selling by an unregistered adviser, breaching the RBI, IRDAI or SEBI conduct rules, or ignoring the suitability and disclosure requirements, strengthens a claim – the regulatory standard is the benchmark the forums apply.

8. Where mis-selling claims fail

Not every loss is a claim, and saying so plainly is part of the advice. Indian mis-selling cases tend to fail where the product simply lost value in the market with no flaw in the sale; where the risks and charges were disclosed and understood; where there was no advice relationship and a genuine, informed instruction; where the free-look or limitation period was missed; where the complaint is taken to the wrong forum; or where the case rests on unsupported oral assurances with nothing in the record. Testing a complaint honestly against these – and against suitability, disclosure, consent, misrepresentation and causation at the point of sale – is what separates a claim worth bringing from one that is not.

9. The UAE corridor – Indian wealth and Gulf private banking

A large and growing share of Indian private wealth is banked and advised in the UAE – through DIFC and ADGM private banks, onshore relationship managers, and independent advisers in Dubai and Abu Dhabi. When a product sold there goes wrong, the claim is rarely a clean “Indian” matter. A resident Indian or an NRI may have been sold an offshore investment-linked policy, portfolio bond or structured note by a UAE-based adviser, booked outside both countries. Three things then have to be untangled: which law governs the advice and the product; which forum can hear the claim – the UAE’s Sanadak ombudsman or courts, the DIFC or ADGM courts, the provider’s home jurisdiction, or an Indian forum; and how FEMA treats the underlying accounts and remittances. Indian remedies still matter where an Indian-regulated entity or a domestic product is involved, but the centre of gravity is frequently the UAE. Three situations should be told apart: an India-regulated product (Indian remedies lead); a UAE-sold offshore product (the UAE and offshore routes lead); and a product merely held by an Indian or NRI investor but booked outside both countries (where jurisdiction turns on the seller, the advice location, the booking entity, the governing-law and forum clause, and where the assets sit). A common example: an Indian expatriate in Dubai is sold an offshore portfolio bond by a UAE adviser – Indian remedies are usually secondary there unless an Indian-regulated entity or product is involved. The two sides are best run together – which is why this page sits beside the companion UAE mis-selling page.

10. Remedies and cross-border enforcement

The remedies available depend on the route. The free-look gives a clean refund early on. The ombudsman schemes can direct compensation within their limits. The consumer commissions can order refunds, compensation and costs. SEBI’s ODR can produce a binding arbitral award. Where the sums are large or the conduct is serious, a civil suit or regulatory escalation may be the better path. The cross-border cases add a further layer – a UAE or offshore award or judgment may need to be recognised and enforced in India, or an Indian order abroad, which turns on reciprocity and the applicable treaties. Choosing the remedy is therefore part legal, part strategic, and is best decided before the first complaint is filed.

The financial mis-selling practice

ATB Legal advises investors, families and NRIs on financial mis-selling and suitability disputes spanning India and the UAE – assessing the suitability and disclosure record, identifying the right regulator, ombudsman or court, and coordinating the Indian and UAE routes where a product was sold through Gulf private banking or to a cross-border client.