Reserve Bank of India revises rural co-operative bank rules for agency and referral sales of financial products from January 2027

The Reserve Bank of India has issued amendment directions revising the framework for rural co-operative banks undertaking agency business and referral services for third-party financial products and services. The changes recast key definitions, clarify the boundary between agency and referral models, and shift customer service and conduct requirements into the Reserve Bank of India Rural Co-operative Banks Responsible Business Conduct Directions 2025. The revised framework takes effect on January 1, 2027. Under the revised rules, agency business is defined as a fee-based arrangement in which a bank acts for a third-party product or service provider without taking risk participation, including marketing, sales and certain after-sale support. Referral services are narrowed to arrangements where the bank only shares information and does not handle continued customer interactions such as distribution, grievance redressal or post-sale services. The amendments also introduce definitions for regulated financial products and services, third-party products and services, and third-party product and service providers. Rural co-operative banks must comply with the Responsible Business Conduct Directions, disclose upfront that the business is undertaken on a fee basis without risk participation, and, for insurance distribution, ensure insurers have robust grievance redressal arrangements in place while limiting digital display to products covered by the arrangement. Referral arrangements with insurance companies must also comply with relevant Insurance Regulatory and Development Authority of India regulations. The amendments remove selected provisions from the existing directions and replace them with the revised framework. The new requirements will apply from January 1, 2027.