What changed
Previously, foreign branches needed RBI's prior approval to handle structured products. Now, RBI allows them to offer such products without prior approval, provided they are at established financial centers. At other centers, only products permitted in India are allowed.
What it means for you
This gives Indian banks more operational flexibility abroad, enabling them to compete in global markets with complex products. However, it demands robust risk management and compliance with both host and home regulations. Banks must also ensure Board approval and adherence to suitability policies.
What you must do
- Review your foreign branches' product offerings to ensure compliance with the new location-based rules.
- Obtain Board approval for any structured products offered at overseas centers.
- Strengthen risk management frameworks for handling complex derivatives at foreign branches.
- Ensure strict adherence to both host country regulations and RBI's suitability policies.
- Seek RBI/Government permission under Banking Regulation Act for activities not permitted domestically.
Who it affects
All scheduled commercial banks with foreign branches or subsidiaries, Indian banks' risk management teams, Compliance departments of banks operating abroad
Can our foreign branch offer any structured product now?
Only at established financial centers like New York, London, Singapore, Hong Kong, Frankfurt, and Dubai. At other centers, only products permitted in India are allowed.
Do we still need RBI approval for these products?
No prior RBI approval is needed for products at the listed hubs, but you must have Board approval and comply with host country regulations.
What if the product is not allowed under Indian banking law?
You must obtain separate permission from RBI or Government of India under Section 6(1)(m) or 19(1)(c) of the Banking Regulation Act, 1949.