What changed
RBI substituted definitions for 'Agency Business' and 'Referral Services' in the Master Direction, adding new sub-paras for 'Regulated financial products and services', 'Third-party Product and Service', and 'Third-party Product and Service Provider'. It also replaced paragraph 18 to permit RRBs to market mutual fund units as agents, subject to SEBI guidelines and board approval.
What it means for you
RRBs must now strictly segregate agency and referral activities, ensuring no risk participation in agency and no post-sale services in referral. This clarifies regulatory boundaries, reducing compliance ambiguity. Banks need to update internal policies, agreements, and training to align with the new definitions and SEBI norms for mutual fund distribution.
What you must do
- Review and revise existing agency and referral agreements to match the new definitions by Jan 1, 2027.
- Ensure board approval for any mutual fund marketing agreements and compliance with SEBI guidelines.
- Train staff on the distinction between agency (with risk) and referral (no post-sale services) activities.
- Update internal policies to include the new definitions for regulated products and third-party providers.
Who it affects
Regional Rural Banks (RRBs), RRB boards and compliance teams, Third-party product and service providers (TPPSPs) partnering with RRBs
What is the key difference between agency and referral services under the new rules?
Agency business involves the bank acting as an agent with risk participation, including marketing, sales, and grievance redressal. Referral services only involve referring customers to a TPPSP without any continued customer interactions like distribution or post-sale services.
When do these amendments take effect?
The amendments come into effect on January 1, 2027.
Are RRBs allowed to distribute mutual funds under these directions?
Yes, RRBs can market mutual fund units as agents, subject to board approval and compliance with SEBI guidelines and regulations.