Mis-selling norms signal stricter oversight

Khara said concerns around mis-selling have been building for years, with regulators stepping in to reinforce trust.

“When it comes to mis-selling, this was something which was brewing for quite some time… banking is a business of trust… unless it is right selling, there could be a challenge. Banks had introduced need assessment, delinked incentives from sales targets and looked at persistency ratios. But now RBI has defined mis-selling clearly and even indicated it could impact the licence… punitive measures are very strict… it is a clear reflection of the regulator’s intent.”

He added that while the financial impact may be limited in size, customer experience and trust are critical.

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Refund rules may need careful implementation
On proposals like refunds and compensation, Khara highlighted both safeguards and operational realities.
“Even now there is a free look period of about 30 days… insurance is a push product… need assessment is important. RBI has even said it could impact licensing. Bundling practices will need to change… recordings and documentation can help verify claims. The intent is welcome, but implementation may need tweaking.”M&A financing a welcome structural change
Khara described the new acquisition financing norms as a positive shift that could keep deals within the domestic banking system.

“M&A financing has been introduced for the first time… opportunities were earlier funded by foreign banks. Final instructions are more relaxed… unlisted acquisitions are permitted and leverage can be refinanced… very pragmatic steps and a welcome move.”

Broker funding rules aimed at curbing speculation
On tighter norms for broker financing, he said the focus is on reducing speculative excesses.

“The intent is to curb speculative trading fuelled by liberal funding… reducing exposure and increasing cash collateral will ensure right financing, while market making and working capital will continue to be funded.”

The takeaway
The regulatory direction underscores stronger customer protection alongside deeper financial market development. For banks and financial firms, adapting quickly to tighter conduct standards while leveraging new financing opportunities will be key.