The Reserve Bank of India (RBI) will issue comprehensive guidelines to regulated entities on advertising, marketing and sales to prevent mis-selling of financial products and services to consumers.

The central bank has also proposed to review existing instructions on conduct-related matters associated with the engagement of recovery agents and recovery of loans. It will issue harmonised instructions in this regard.

Mis-selling of financial products and services by regulated entities (REs) has significant consequences for both customers and the financial sector, the RBI said in its report on Trend and Progress of Banking in India 2024-25, released on Monday.

The RBI noted that the rapid growth of digital lending, which has emerged as a key innovation in India’s financial system, has also led to concerns such as mis-selling, data-privacy breaches, unfair practices, opaque interest rates and fees, and unethical recovery methods, with the involvement of third-party lending service providers.