The Reserve Bank of India (RBI) on October 04, 2024, issued a draft circular regarding the Forms of Business and Prudential Regulation for Investments.
Paragraphs 4 and 5 of the Master Direction- Reserve Bank of India (Financial Services provided by Banks) Directions, 2016, have been amended as: -
• Paragraph 4 – “Forms of Business”, states that a bank can undertake only activities permitted under Section 6(1) of the Banking Regulation Act, 1949, either departmentally or through subsidiaries, with core activities like deposits and lending conducted by the bank, while other businesses may be done through group entities under specific conditions, ensuring no overlap in lending activities and requiring prior approval from the Reserve Bank for any new activities.
• Paragraph 5 – “Prudential Regulation for Banks’ Investments”, states that Banks' investments in group entities or other companies, including overseas investments, are subject to prudential limits, with equity investments capped at 10% of paid-up capital and reserves for individual companies, and 20% for all companies combined, while additional restrictions apply to specific types of investments, requiring immediate reporting of any breaches to the Reserve Bank within seven working days.
• It states that the provisions contained in paragraphs 4(a)(iii), 4(a)(iv)(a), 5(a)(ii)(e), 5(a)(ii)(f) and 5(a)(ii)(g) shall come into effect two years from the date of the final circular.
• It states that the report shall be submitted within two months from the date of the final circular.
Refer to the attached document for detailed notification.
[Circular no. - RBI/2024-25/DOR.RAUG.AUT.REC.No. /24.01.041/2024-25]
