Mumbai, Feb. 16 -- The banking regulator's proposed framework to encourage responsible selling of financial products will likely dent banks' earnings from insurance policy sales, which generate about Rs.25,000 crore annually for the industry.

On 11 February, the Reserve Bank of India (RBI) released draft guidelines targeting mis-selling, bundled sales, and even "dark patterns" in banking apps, redrawing the boundaries of how banks sell such products. The norms will be applicable from July.

"The responsibility on banks has increased a lot," said Anil Gupta, senior vice-president and co-group head of financial sector ratings at Icra.

Gupta added that the onus will pass on to banks to ensure the right products are sold to customers, which...