Introduction
The Reserve Bank of India has notified the Reserve Bank of India (Payments Banks – Undertaking of Financial Services) Amendment Directions, 2026 vide circular
DOR.RAUG.AUT.REC.No.106/24.01.041/2026-27 dated 15th June, 2026. The Amendment Directions have been issued in exercise of powers conferred under Section 35A of the Banking Regulation Act, 1949 and will come into effect on 1st January, 2027.
The amendments modify the Reserve Bank of India (Payments Banks – Undertaking of Financial Services) Directions, 2025 (Master Direction) with the stated objective of reviewing and rationalising the regulatory framework governing agency business and referral services undertaken by Payments Banks. Simultaneously, customer service and conduct-related instructions are being consolidated into the separate Reserve Bank of India (Payments Banks – Responsible Business Conduct) Directions, 2025.
Background
Payments Banks, by their design, operate with restrictions on lending and deposit-taking but are permitted to distribute third-party financial products to their customer base. Given the wide reach of Payments Banks — particularly in semi-urban and rural geographies — the agency and referral channels through which they distribute insurance, mutual fund, and pension products carry significant consumer protection implications. The present amendment sharpens the definitional and operational framework governing these activities.
Key Amendments
1. Revised and New Definitions (Paragraph 4 of the Master Direction)
The Amendment Directions substitute and supplement the existing definitions in paragraph 4 of the Master Direction as follows.
Agency Business has been redefined as an arrangement under which a bank acts as an agent of a Third-Party Product or Service Provider (TPPSP) without risk participation, to facilitate the sale of the latter's financial products or services — such as insurance, mutual fund, or pension products — to its own customers. The activities covered under agency business may include marketing, sales, promotion, initial point of contact for grievance redressal, and other after-sale services related to the product or service.
Referral Services has been redefined as an arrangement under which a bank refers its customers to a TPPSP by making available information about the financial products or services offered by the TPPSP. Importantly, the revised definition clarifies that Referral Services cover only those third-party products or services where continued customer interactions — such as distribution, grievance redressal, and post-sales services — are not undertaken by the bank.
Three new definitions have been inserted after the existing sub-paragraphs. Regulated Financial Products and Services are defined as financial products and services falling under the regulatory framework of RBI, SEBI, IRDAI, PFRDA, or Overseas Regulatory Authorities including IFSCA. Third-Party Product and Service (TPPS) is defined by reference to the Reserve Bank of India (Payments Banks – Responsible Business Conduct) Directions, 2025. Third-Party Product and Service Provider (TPPSP) is defined as an entity that has entered into an agency business or referral arrangement with a bank to offer its product or service to the bank's customers.
2. Omission of Paragraphs 7 and 8
Paragraphs 7 and 8 of the Master Direction have been omitted in their entirety. The regulatory instructions previously covered therein relating to customer service and conduct aspects are being subsumed into the Responsible Business Conduct Directions, 2025, as part of the ongoing consolidation exercise.
3. Revised Framework for Agency Business (Paragraph 12)
Paragraph 12 of the Master Direction has been substituted with a revised framework governing the conduct of agency business by Payments Banks. The key conditions are as follows.
Banks shall deal only in regulated financial products and services in which a bank is permitted to deal under sub-sections (a) to (m) and (o) of Section 6(1) of the Banking Regulation Act, 1949. Only such TPPS covered under the arrangement shall be listed or displayed on websites, mobile applications, or any other digital banking channels offered by the bank.
Banks shall ensure full compliance with the Reserve Bank of India (Payments Banks – Responsible Business Conduct) Directions, 2025 in the conduct of agency business.
Agency business shall be undertaken on a fee basis without any risk participation by the bank. This shall be explicitly disclosed upfront to customers.
Banks shall ensure that the TPPSP whose products are being sold has robust customer grievance redressal arrangements in place, and the bank may facilitate the redressal of grievances on behalf of customers.
4. Omission of Paragraphs 13 to 15
Paragraphs 13, 14, and 15 of the Master Direction have been omitted. As with paragraphs 7 and 8, the relevant customer service and conduct-related instructions are being migrated to the Responsible Business Conduct Directions, 2025.
5. Revised Framework for Referral Services (Paragraph 16)
Paragraph 16 of the Master Direction has been substituted with a revised and more detailed framework for referral services. The conditions prescribed are as follows.
Banks shall comply with the Reserve Bank of India (Payments Banks – Responsible Business Conduct) Directions, 2025 in the conduct of referral services.
The role of the bank under the referral arrangement must be purely referral in nature. Banks may market and refer TPPS to their customers but shall not sell under a referral arrangement. This distinction must be made explicitly clear to customers upfront through a disclaimer.
The name or brand of the bank shall not feature in any of the product or service documents relating to the referred TPPS.
The list of TPPS under the referral arrangement of a bank shall be published on its website, mobile application, and any other digital banking channels to ensure transparency.
No processes relating to TPPS shall be integrated with the bank's platform or carried out within the bank's premises — unless specifically permitted — nor shall they be accessible in the form of a micro-site or micro-application. The only permissible integration is an access link to redirect the customer to the TPPSP's own platform.
The selection of the TPPSP shall be undertaken with proper due diligence to manage the reputational risks to which the bank may be exposed. The bank shall ensure that the TPPSP has robust customer grievance redressal arrangements in place.
Effective Date
The Amendment Directions shall come into effect on 1st January, 2027, giving Payments Banks approximately six months to align their existing agency and referral arrangements, update customer disclosures, revise digital channel configurations, and undertake necessary due diligence on TPPSPs.
Significance and Compliance Implications
The amendment draws a clear regulatory line between agency business — where the bank actively participates in distribution and after-sale servicing — and referral services — where the bank's role ends at directing the customer to the TPPSP. This distinction has important implications for how Payments Banks structure their product partnerships, configure their digital platforms, and frame customer-facing communications.
The prohibition on brand co-mingling in referral arrangements and the bar on platform integration beyond a redirect link are particularly significant for Payments Banks with large digital customer bases, where the line between referral and distribution can easily blur. Banks will need to conduct a thorough review of their existing TPPSP arrangements to determine whether they qualify as agency business or referral services under the revised definitions, and ensure that the corresponding compliance frameworks are in place before the effective date.
The consolidation of customer service and conduct norms into the Responsible Business Conduct Directions, 2025 is also a notable structural development, as it signals RBI's intent to maintain a clean separation between product distribution rules and conduct obligations for Payments Banks.
Conclusion
Payments Banks operating agency business and referral arrangements should treat the 1st January, 2027 deadline as a firm compliance milestone. The immediate priorities include reclassifying existing TPPSP arrangements under the revised definitions, updating digital channels and disclosures, reviewing platform integrations for referral services, and formalising due diligence frameworks for TPPSP onboarding.
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