RBI mandates disclosure of commissions on third-party product sales by banks
Current · Source: Reserve Bank of India · RBI/2009-10/225 · issued 16 Nov 2009 · ~2 min read
Quick answerBanks must now disclose all commissions or fees received from mutual funds, insurers, or financial companies for marketing or referring their products. This immediate rule aims to ensure transparency and protect customer interests when banks sell competing third-party financial products.
The rule, in the simplest words
Banks must disclose all commissions or fees received from mutual funds, insurers, or financial companies for marketing or referring their products.
Banks must be transparent about the financial incentives they receive when selling third-party products.
Banks must update their disclosure processes and train staff to communicate these details clearly.
How it plays out — a real example
A payments & clearing officer in Indore, Mr. Kumar, must now clearly inform his customers about the commissions he receives from a mutual fund company for marketing their units. This ensures that customers are aware of the hidden costs and can make informed decisions about their investments.
What changed
RBI has mandated that banks disclose to customers all commissions or other fees received from mutual funds, insurance companies, and other financial firms for marketing or referring their products. This applies to all such activities, including those previously permitted under the Master Circular on Para-banking activities, such as marketing mutual fund units, insurance agency business, referral services, and non-discretionary investment advisory services.
What it means for you
Banks must now be transparent about the financial incentives they receive when selling third-party products, which could affect customer trust and product recommendations. This may require banks to update their disclosure processes and train staff to communicate these details clearly. It also levels the playing field among competing products by making hidden costs visible to customers.
What you must do
Update customer-facing documentation and scripts to include clear disclosure of all commissions or fees received from third-party product providers.
Train frontline staff and relationship managers on the new disclosure requirements for mutual fund, insurance, and other financial product sales.
Review existing agreements with mutual funds, insurers, and financial companies to ensure compliance with the disclosure mandate.
Implement internal audit checks to verify that disclosures are being made accurately and consistently across all channels.
Who it affects
All scheduled commercial banks (excluding RRBs) engaged in marketing or referral of third-party financial products, Bank branches and relationship managers selling mutual funds, insurance, or other financial products, Compliance and audit teams responsible for para-banking activities
❓ Common questions
Does this disclosure requirement apply to all types of third-party products sold by banks?
Yes, it covers mutual fund units, insurance products, and other financial products marketed or referred by banks, including those under referral arrangements or non-discretionary investment advisory services.
When does this rule come into effect?
The instruction is effective immediately from the date of the circular, November 16, 2009.
Do banks need to disclose commissions even for products where they have a non-risk participation arrangement?
Yes, the disclosure requirement applies regardless of whether the bank has risk participation or not, as long as it receives any form of commission or fee for marketing or referring the product.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/225
DBOD.No.FSD.BC. 60/24.01.001/2009-10
November 16, 2009
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir/Madam
Marketing/distribution of mutual fund/insurance etc., products by banks
Please refer to our Master Circular on Para-banking activities ( Circular No. DBOD. No.FSD.BC 18/ 24.01.001/ 2009-10 dated July 1, 2009).
2. In terms of paragraph 7 thereof, banks have been advised that they can enter into agreements with mutual funds for marketing the mutual fund units subject to certain terms and conditions. Similarly, in terms of paragraph 12 of the above Master Circular, banks have been advised that they need not obtain prior approval of the RBI for engaging in insurance agency business or referral arrangement without any risk participation, subject to the conditions stipulated in Annex 4 of the Master Circular. Banks have also been permitted, vide paragraph 17 of the above circular, to offer purely referral services on a non-risk participation basis to their customers, for financial products subject to certain conditions. In addition to the above, banks also provide non-discretionary Investment Advisory Services to their clients for which approvals are granted by us on a case-to-case basis. Further, in some cases, banks have also been permitted to offer discretionary Portfolio Management Services, through their subsidiaries, subject to certain conditions.
3. In all the activities referred to above, it is likely that banks may be marketing/referring, several competing products of various mutual fund/insurance/financial companies to their customers. Keeping in view the need for transparency in the interest of the customers to whom the products are being marketed/referred, it has since been decided that banks should disclose to the customers, details of all the commissions/other fees (in any form) received, if any, from the various mutual fund/insurance/other financial companies for marketing/referring their products.
4. The above instructions will come into force with immediate effect.
Yours faithfully
(P.Vijaya Bhaskar)
Chief General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/225 · issued 16 Nov 2009. The plain-English explanation above is BankPulse’s own independent summary.
Update customer-facing documentation and scripts to include clear disclosure of all commissions or fees received from third-party product providers.
📜 Compliance
Train frontline staff and relationship managers on the new disclosure requirements for mutual fund, insurance, and other financial product sales.
Review existing agreements with mutual funds, insurers, and financial companies to ensure compliance with the disclosure mandate.
Implement internal audit checks to verify that disclosures are being made accurately and consistently across all channels.
Grouped from the action items above — a single circular may involve more than one team.
Worked example & action-note template
Example: if you are a Branch Manager at a bank this circular applies to (All scheduled commercial banks (excluding RRBs) engaged in marketing or referral of third-party financial products, Bank branches and relationship managers selling mutual funds, insurance, or other financial products, Compliance and audit teams responsible for para-banking activities), your first concrete step on “RBI mandates disclosure of commissions on third-party product sales by banks” is: “Update customer-facing documentation and scripts to include clear disclosure of all commissions or fees received from third-party product providers.” (RBI issued this 16 Nov 2009).
Circular: RBI/2009-10/225 -- RBI mandates disclosure of commissions on third-party product sales by banks
Issued: 16 Nov 2009
Action required: Update customer-facing documentation and scripts to include clear disclosure of all commissions or fees received from third-party product providers.
Action required: Train frontline staff and relationship managers on the new disclosure requirements for mutual fund, insurance, and other financial product sales.
Action required: Review existing agreements with mutual funds, insurers, and financial companies to ensure compliance with the disclosure mandate.
Action required: Implement internal audit checks to verify that disclosures are being made accurately and consistently across all channels.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
💬 Banker Discussion
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5373&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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