What changed
Earlier, RBI required prior approval for foreign branches to deal in products not allowed in India. Now, RBI has removed that prior approval requirement, allowing such dealing subject to conditions. The framework also explicitly extends these instructions to IFSCs like GIFT City.
What it means for you
Indian banks and AIFIs can now offer innovative financial products overseas and in IFSCs without waiting for RBI's nod each time, speeding up business. However, they must ensure robust risk management, board oversight, and compliance with both home and host prudential norms. This could boost competitiveness of Indian banks in global markets and GIFT City.
What you must do
- Obtain board approval before dealing in any new financial product not permitted domestically.
- Ensure adequate risk management capability, pricing ability, and MTM reporting for such products.
- Comply with host regulator's rules and RBI's prudential norms, applying the more stringent of the two.
- Report exposures and MTM on these products in returns to RBI as specified.
- Avoid dealing in INR-linked products unless specifically permitted by RBI, and do not accept structured deposits from Indian residents.
Who it affects
All Indian commercial banks (excluding co-operative, RRBs, LABs), All India Financial Institutions (AIFIs), Foreign branches and subsidiaries of Indian banks/AIFIs, Branches/subsidiaries operating in IFSCs including GIFT City
Do we need RBI approval for each new product now?
No, prior RBI approval is no longer required. However, you must have board approval, adequate risk management, and comply with host regulator conditions.
Can our GIFT City branch deal in products not allowed in India?
Yes, the circular explicitly permits IFSC branches to deal in such products, subject to the same conditions as foreign branches.
What prudential norms apply to these products?
All applicable norms like capital adequacy, exposure limits, and valuation. You must follow the more stringent of host or home regulations. If RBI norms don't cover a product, seek specific guidance from RBI.