The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Third Amendment Directions, 2026, introducing a revised regulatory framework for agency business and referral services undertaken by commercial banks. The amendments, issued under Section 35A of the Banking Regulation Act, 1949, will come into effect from January 1, 2027. The revised framework aims to strengthen governance, enhance transparency, improve customer protection, and align banks’ distribution activities with the Responsible Business Conduct Directions, 2025.
The RBI has reviewed the existing regulations governing banks’ engagement with third-party financial product and service providers and has streamlined the framework by redefining key concepts and clarifying the scope of permissible activities.
Under the revised directions, Agency Business refers to arrangements where a bank or its group entity acts as an agent for a third-party product or service provider without assuming any risk participation. Such arrangements may include:
- Marketing and promotion
- Sales activities
- Customer assistance
- Grievance facilitation
- Post-sale services
These activities may be undertaken for regulated financial products such as insurance, mutual funds, and pension products.
The amendment also revises the definition of Referral Services. Under this model, banks may only refer customers to third-party providers and provide information regarding their products and services. Banks are prohibited from undertaking distribution, sales, grievance redressal, or post-sale services under referral arrangements.
The RBI has further introduced definitions for regulated financial products and services, third-party products and services (TPPS), and third-party product and service providers (TPPSPs) to provide greater regulatory clarity.
The revised framework permits banks to facilitate the sale of only regulated financial products and services that fall within the ambit of recognised financial sector regulators such as the RBI, SEBI, IRDAI, PFRDA, and overseas regulators, including IFSCA. Agency business must be conducted strictly on a fee-based model without any risk participation, and banks are required to disclose this arrangement clearly to customers. Banks must also ensure that third-party providers maintain robust customer grievance redressal mechanisms.
For referral arrangements, the RBI has prescribed stricter safeguards. Banks must clearly disclose that their role is limited to referrals and not sales. The bank’s name or brand cannot appear in product documentation, and customer journeys relating to third-party products cannot be integrated into the bank’s platforms except through redirect links. Banks are also required to conduct due diligence on third-party providers to mitigate reputational risks.
Overall, the amendment establishes a more transparent and customer-centric framework for banks offering third-party financial products while reinforcing regulatory oversight and responsible business practices across the financial services ecosystem.
