RBI allows bank branches abroad to sell structured products

Easing norms for functioning of overseas branches of Indian banks, the Reserve Bank has permitted them to offer structured financial and derivative products, a move that would help in improving their income. However, these products like Exchange Traded Funds and bond derivatives are not permitted in the domestic market. As per earlier rules, banks were not permitted to offer structured financial products through their branches or subsidiaries outside India that are not specifically permitted in the domestic market.

"On a review, it has been decided that if foreign branches/subsidiaries of Indian banks propose to offer structured financial and derivative products that are not specifically permitted by the RBI in the domestic market, they may do so only at the established financial centers outside India," RBI said in a notification today. The established foreign branches or subsidiaries could be in New York, Singapore, Hong Kong, Frankfurt, Dubai etc. RBI also added that the foreign branches or subsidiaries of any such bank should ensure that their entities dealing with such products should have adequate knowledge, understanding and risk management capability for handling such products. However, for other centres, RBI said banks may offer only those products that are specifically permitted in India. The central bank has also directed banks to offer such products in foreign branches in compliance with the host country regulations. "Banks should continue to adhere to more stringent among the host and home regulations in respect of these products. In particular, banks should ensure that the suitability and appropriateness policy is strictly adhered to," it added.

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