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Why India needs a dedicated financial conduct regulator

India’s financial system stands at an inflexion point. The expansion has created opportunities, but financial deepening cannot be sustained unless consumers are protected.

India has undergone a remarkable financial transformation in the past two decades. Millions of households have entered the formal financial system through digital payments, expanded banking access, mutual fund investments, insurance products, pension schemes, and direct participation in capital markets.

Yet the success of financialisation has exposed a less celebrated reality: a corresponding increase in consumer vulnerability. Complaints ranging from product mis-selling and opaque disclosures to excessive compliance burdens, aggressive recovery practices and deficient grievance redressal mechanisms have proliferated across the financial sector. 

Effective consumer protection cannot be treated merely as a subsidiary objective within a broader regulatory framework. It requires dedicated institutional focus, specialised expertise and clear accountability.

Difficulty of the current set-up

All major financial regulators in India—the Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI) and Pension Fund Regulatory and Development Authority (PFRDA)—recognise consumer protection as an important regulatory objective. Yet, in practice, it remains subordinate to their primary mandates of financial stability, prudential supervision and market development. Ombudsman and grievance-redressal arrangements exist, but they are frequently perceived as slow, fragmented and lacking sufficient authority to provide effective remedies.

This is further complicated by many issues that fall into the cracks of India’s fragmented regulatory architecture. For example, a customer who has been mis-sold an insurance product through a bank branch may find the issue touching the jurisdictions of multiple regulators. Similar complexities arise in the distribution of mutual funds, pension products and hybrid........

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