RBI draft guidelines would bar banks from requiring or bundling third‑party products (including loan-linked insurance) as a condition for sanctioning loans.

Banks and insurer partners selling group credit life at the point of retail loan origination will need to redesign sales journeys, consent capture, and disclosures to separate credit decisions from insurance purchase. This reduces the effectiveness of “default add-on” distribution, likely slowing premium growth in a segment estimated at ~₹30,000 crore annually and forcing a shift toward opt-in, post-sanction, or standalone channels. Lenders may face near-term fee/commission compression and higher compliance monitoring costs as mis-selling controls tighten.