Master Circular on Para-Banking Activities (2011)

What changed

This Master Circular updates the previous July 1, 2010 circular by incorporating all instructions issued up to June 30, 2011. It consolidates multiple earlier circulars into a single reference document for para-banking activities. No new policy changes were introduced; it is a compilation exercise.

What it means for you

Banks now have a single, updated reference for all para-banking rules, reducing compliance ambiguity. The circular reinforces existing prudential norms for activities like leasing, insurance, and mutual funds. Lenders must ensure their departmental or subsidiary operations align with these consolidated guidelines to avoid regulatory gaps.

What banks were required to do at the time

• Review your bank's para-banking activities against the updated Master Circular to ensure compliance with all consolidated instructions.
• Update internal policies and training materials to reference this 2011 circular as the governing framework.
• Verify that subsidiaries and affiliated companies engaged in para-banking adhere to investment ceilings and prudential norms specified.
• Ensure proper disclosure of commissions and remunerations from referral services as per paragraph 18 of the circular.

Who it affects

All scheduled commercial banks (excluding RRBs), Bank subsidiaries and affiliated companies in financial services, Departments handling equipment leasing, hire purchase, factoring, Banks acting as primary dealers, mutual fund sponsors, insurance agents, or pension fund managers