RBI Grade B Current Affairs — 22 June 2026

The RBI issued Responsible Lending and Responsible Business Conduct directions to formally combat bank mis-selling. IRDAI data shows 1,20,726 life insurance complaints in FY24 and 1,20,429 in FY25, with unfair business practice grievances rising 14% year-on-year to over 26,000 in FY25. Banks earned over Rs 1,700 crore in commissions in FY24 from selling financial products. Bancassurance partners accounted for 53% of private life insurers' individual new business premium in FY25, with banks alone contributing 49%.

For over two decades, Indian banks quietly transformed from deposit-and-loan institutions into financial supermarkets. This shift was commercially logical — fee-based income from selling insurance, mutual funds and credit products became a significant revenue stream. Banks earned over Rs 1,700 crore in commissions in FY24 alone, and bancassurance channels now drive nearly half of private life insurers' new business premium. The incentive architecture that emerged, however, created structural pressure to sell regardless of customer suitability. A 2024 survey by 1 Finance found that over 51% of relationship managers feared job loss if they missed sales targets, and 84% reported intense selling pressure. The problem was compounded by digitisation. Where branch mis-selling once affected dozens per agent, a deceptively designed digital journey — pre-ticked boxes, default add-ons, opaque cancellation flows — could affect millions simultaneously. RBI's new framework responds to this evolution by shifting from a documentation-based compliance model to a suitability-based accountability model. Customer signature no longer absolves the institution. Mis-selling is now formally defined to include selling products unsuitable for a customer's age, income, risk profile or financial literacy — even with signed consent. The framework also explicitly targets dark patterns in digital interfaces, mandates explicit consent, bans forced bundling and requires compensation where mis-selling is established. This marks a fundamental regulatory philosophy shift: conduct over paperwork.

RBI imposed a ₹6.20 lakh monetary penalty on Five-Star Business Finance for FY 2024-25 via a speaking order dated June 18, 2026. The penalty was levied under Section 58G(1)(c) read with Section 58B(5)(aa) of the RBI Act. Two lapses triggered action: failure to deploy robust software for identifying suspicious transactions, and inadequate disclosure of risk gradation rationale and differential interest rates in loan application forms and sanction letters. The company confirmed no material impact.

This penalty case is significant for RBI Grade B candidates because it illustrates two core regulatory expectations RBI holds for NBFCs: AML/CFT compliance infrastructure and fair lending transparency. Five-Star Business Finance, a listed NBFC focusing on micro-enterprise lending, fell short on both fronts.

The suspicious transaction identification failure points to gaps in the NBFC's anti-money laundering (AML) software — a requirement flowing from PMLA obligations and RBI's Master Direction on KYC. RBI expects all regulated entities to maintain technology capable of flagging unusual patterns in real time, especially NBFCs serving informal borrowers where cash transactions are common.

The second lapse — not disclosing risk gradation methodology and interest rate rationale in application forms and sanction letters — directly violates RBI's Fair Practices Code for NBFCs. This code mandates full transparency so borrowers understand why they are charged higher or lower rates. It protects financially vulnerable borrowers from opaque pricing.

The legal basis — Section 58G(1)(c) read with Section 58B(5)(aa) of the RBI Act — is a standard enforcement provision allowing RBI to impose penalties on NBFCs for non-compliance with directions. The 'speaking order' format means the regulator must give reasoned written grounds, ensuring accountability. For RBI Grade B FM paper, understanding the interplay between NBFC supervision, fair lending norms, and the enforcement mechanism under the RBI Act is directly testable.