Date: 2022-12-01Category: Not ApplicableState: Union GovernmentCountry: India
Operations of subsidiaries and branches of Indian banks and All India Financial Institutions (AIFIs) in foreign jurisdictions and in International Financial Services Centers (IFSCs) - Compliance with statutory/regulatory norms
**Executive Summary:**
This Reserve Bank of India (RBI) circular, effective immediately, outlines guidelines for the operations of Indian banks and All India Financial Institutions (AIFIs) subsidiaries and branches in foreign jurisdictions and International Financial Services Centers (IFSCs), including GIFT City. It permits dealing in financial products not available or allowed in the Indian domestic market, subject to specific conditions and compliance with regulatory norms. The circular also repeals two previous circulars on the same subject.
**Key Points / Main Content:**
* **Applicability:**
* Applies to all banks regulated by the RBI (excluding cooperative banks, Regional Rural Banks, and Local Area Banks) and AIFIs.
* **Dealing in Financial Products:**
* Foreign branches/subsidiaries of Indian banks/AIFIs can deal in financial products not available/permitted in the Indian domestic market without prior RBI approval, subject to conditions.
* Branches/subsidiaries of Indian banks/AIFIs operating in IFSCs (including GIFT City) can deal in financial products not available/permitted in the Indian domestic market, subject to compliance with laws and regulations.
* **Conditions for Dealing:**
* Prior Board approval from the parent Indian bank/AIFI and approval from appropriate authorities in the concerned jurisdictions is required.
* Adequate knowledge, understanding, and risk management capability for handling such products.
* Ability to price/value products if acting as market makers.
* Exposure and mark-to-market (MTM) on these products must be captured and reported to the RBI.
* No dealing in products linked to the Indian Rupee unless specifically permitted by the RBI.
* No acceptance of structured deposits from any Indian resident.
* Adherence to suitability and appropriateness policies.
* **Compliance with Prudential Norms:**
* Financial products dealt with shall attract prudential norms (capital adequacy, exposure norms, periodical valuation, etc.).
* Parent bank/AIFI shall adhere to more stringent norms between host and home regulations.
* Parent bank/AIFI shall seek specific guidance from RBI if current norms do not specify prudential treatment.
* **Activities Subject to Indian Laws:**
* Activities of branches/subsidiaries in foreign jurisdictions and IFSCs are subject to Indian laws, unless specifically exempted.
* **Repeal of Earlier Instructions:**
* Circular DBOD.No.BP.BC.89/21.04.141/2008-09 dated December 1, 2008, is repealed.
* Circular DBOD.No.BP.BC.111/21.04.157/2013-14 dated May 12, 2014, is repealed.
**Impact Analysis**
* **Indian Banks and AIFIs:**
* Impact: Can expand their range of financial product offerings in foreign jurisdictions and IFSCs, potentially increasing revenue and market share, while adhering to new guidelines and reporting requirements.
* Action Required: Review and update internal policies and procedures to comply with the new guidelines, obtain Board approvals, ensure adequate risk management capabilities, and implement reporting mechanisms for financial products dealt with in foreign branches/subsidiaries and IFSCs.
* **Branches/Subsidiaries of Indian Banks and AIFIs in Foreign Jurisdictions and IFSCs:**
* Impact: Can offer a wider array of financial products, including structured products, to their clients, but must comply with local regulations and the parent company's policies.
* Action Required: Understand and comply with the conditions outlined in the circular, including obtaining necessary approvals, demonstrating risk management capabilities, and adhering to suitability and appropriateness policies.
* **Reserve Bank of India:**
* Impact: Responsible for monitoring the activities of Indian banks and AIFIs in foreign jurisdictions and IFSCs, ensuring compliance with the guidelines and maintaining financial stability.
* Action Required: Implement monitoring mechanisms to track the types of financial products being dealt with, assess the associated risks, and provide guidance on prudential treatment where necessary.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector and monetary policy.
All India Financial Institutions (AIFIs): Financial institutions in India regulated by the Reserve Bank of India.
International Financial Services Centers (IFSCs): Special economic zones in India that provide financial services to non-residents and residents, often with more liberal regulations.
Gujarat International Finance Tec-City (GIFT City): An IFSC located in Gujarat, India.
Indian banks: Banks that are established and operating in India.
Indian Rupee: The official currency of India.
Mumbai, Maharashtra: A city in India where Department of Regulation, Central Office of Reserve Bank of India is located.
Usha Janakiraman: Chief General Manager at Reserve Bank of India
भारतीय �रज़व� ब�क
________________________RESERVE BANK OF INDIA________________________
www.rbi.org.in
RBI/2022-23/145
DOR.MRG.REC.87/00-00-020/2022-23 December 1, 2022
Operations of subsidiaries and branches of Indian banks and All India Financial
Institutions (AIFIs) in foreign jurisdictions and in International Financial Services
Centers (IFSCs) - Compliance with statutory/regulatory norms
As you are aware, Reserve Bank had vide circular DBOD.No.BP.BC.89
/21.04.141/2008-09 dated December 1, 2008 and circular
DBOD.No.BP.BC.111/21.04.157/2013-14 dated May 12, 2014 issued instructions to
Indian banks and AIFIs on the issue of dealing in financial products by their
branches/subsidiaries operating outside India. On a review, it was felt that a framework
needs to be in place to allow them to undertake activities which are not specifically
permitted in the Indian domestic market and also to specify the applicability of these
instructions to International Financial Services Centers (IFSCs) in India including
Gujarat International Finance Tec-City (GIFT City).
1. Applicability and commencement
(1) These directions are applicable to all banks regulated by the Reserve Bank
(excluding co-operative banks, Regional Rural Banks and Local Area Banks) and All
India Financial Institutions (AIFIs).
(2) They shall come into force with immediate effect.
2. Dealing in financial products
(1) The foreign branches/foreign subsidiaries of Indian banks/AIFIs can deal in financial
products, including structured financial products, which are not available or are not
permitted by the Reserve Bank in the domestic market without prior approval of
Reserve Bank, subject to compliance with conditions specified in paragraph 3 of these
directions and those prescribed by the host regulator.
िविनयमन िवभाग,क�द्रीय काया�लय, 12 वी ंऔर 13 वी ंमंिजल, क�द्रीय काया�लय भवन, शहीद भगत िसंह माग�,फोट�,मुंबई-400001
दूरभाष: 022-22601000 फै�: 022-22705691 ई-मेल: cgmicdor@rbi.org.in
____________________________________________________________________________________________________________________________________
Department of Regulation, Central Office, 12th and 13th Floor, Central Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai- 400 001
Tel: 022- 2260 1000 Fax: 022-2270 5691 email: cgmicdor@rbi.org.in
िहंदी आसान है, इसका प्रयोग बढ़ाइए(2) The branches/subsidiaries of Indian banks/AIFIs operating in IFSCs including those
operating out of GIFT City may also deal in financial products, including structured
financial products, which are not available or are not permitted by the Reserve Bank in
the domestic market subject to compliance with all applicable laws/regulations and
conditions stipulated in paragraph 3 below and those prescribed by the host regulator.
3. Conditions for dealing in financial products
While allowing branches/ subsidiaries in foreign jurisdictions as well as in IFSCs to deal
in such products, the parent Indian bank/AIFI shall ensure that:
a) dealing in such products is done with the prior approval from their Board and, if
required, the appropriate authority in the concerned jurisdictions.
b) they have adequate knowledge, understanding, and risk management capability
for handling such products.
c) they act as market makers for products only if they have the ability to price/value
such products and the pricing of such products is demonstrable at all times.
d) their exposure and mark-to-market (MTM) on these products are appropriately
captured and reported in the returns furnished to the Reserve Bank. They shall
provide information about dealing in such financial products as may be specified
by the Reserve Bank in the manner and format and within the time frame as
prescribed by the Reserve Bank.
e) they do not deal in products linked to Indian Rupee unless specifically permitted
by Reserve Bank.
f) they do not accept structured deposits from any Indian resident; and
g) they adhere to the suitability and appropriateness policies as mandated by the
Reserve Bank and the host regulators, as applicable.
4. Compliance with prudential norms
(1) The financial products dealt with by the foreign branches and subsidiaries as well
as IFSCs shall attract the prudential norms such as capital adequacy, exposure norms
(including Large Exposure Framework), periodical valuation, and all other applicable
2norms. Parent bank shall adhere to more stringent among the host and home
regulations in respect of prudential norms.
(2) In case the current norms of the Reserve Bank do not specify prudential treatment
of any financial product, the parent bank/AIFI shall seek specific guidance from
Reserve Bank.
5. Activities subject to Indian laws
The activities of branches/subsidiaries in foreign jurisdictions and IFSCs shall be
subject to the laws in India, unless specifically exempted by law.
6. Repeal of earlier instructions
With the issuance of these directions, the following circulars shall stand repealed:
a) Circular DBOD.No.BP.BC.89 /21.04.141/2008-09 dated December 1, 2008; and
b) Circular DBOD.No.BP.BC.111/21.04.157/2013-14 dated May 12, 2014.
Yours faithfully,
(Usha Janakiraman)
Chief General Manager
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