On July 21, 2025, the Reserve Bank of India released draft rules under the Digital Banking Channels Authorisation Directions, 2025, proposing that banks must no longer display third‑party products or services on their digital banking channels—unless explicitly permitted by the RBI. This includes offerings from subsidiaries, joint ventures, or associate entities of the bank.
Why Is RBI Taking This Step?
The draft aims to enhance consumer protection and reduce mis-selling, including of insurance and mutual fund products through bank digital interfaces. It’s part of a broader push to ensure transparency and ethical sales practices
Key Provisions of the Proposal
- Strict display restrictions: No showcasing of third‑party products on internet or mobile banking platforms—unless RBI grants specific exceptions.
- Risk-monitoring systems: Banks must deploy transaction surveillance, customer behaviour analysis, and fraud-risk checks consistent with their risk policies
- Explicit customer choice: Banks cannot make digital banking mandatory for accessing other services like debit cards. Opt-in consent is essential.
- Draft consultation period: Stakeholders can submit feedback on the proposal until August 11, 2025
Context & Regulatory Background
This new directive follows years of RBI scrutiny into the mis-selling of third‑party products by banks—such as insurance or mutual funds—often without proper disclosures or customer consent
In April 2024, the RBI also issued guidance requiring regulated entities to conduct thorough due diligence and risk assessments before outsourcing critical functions to third-party vendors Reuters.
What It Means for Banks and Customers
- For banks: They must overhaul digital product partnerships and remove promotional space for third-party services, revising product strategies accordingly.
- For customers: The change promotes clearer, fairer choices—customers won’t be exposed to external product pushes via a bank’s website or app.
- For fintechs and third parties: Direct partnerships or listing via banks’ digital channels may become restricted, unless RBI grants specific exceptions.
Enforcement & Next Steps
- These are draft guidelines; the RBI has invited feedback from stakeholders through August 11, 2025 before finalization
- Once finalized, banks must immediately comply—or face regulatory penalties.
- The RBI may grant limited exceptions under controlled circumstances, which banks must apply for formally.
Summary Table
| Provision | Detail |
|---|---|
| Who | Banks operating on digital banking platforms |
| What is banned | Display of third-party products (incl. internal entities) |
| Where | Internet banking, mobile apps, other digital channels |
| Why | To prevent mis-selling & protect consumers |
| Consultation period | Until August 11, 2025 |
| Future steps | Banks to remove content and apply for permitted exceptions |
