The Reserve Bank of India has said that no prior approval of the central bank would be required for foreign branches or subsidiaries to provide plain-vanilla financial products.
?As regards transacting by the foreign branches or subsidiaries in financial products which are not available in the Indian market and on which no specific prohibition has been currently placed by the RBI, no prior approval of the RBI would be required for the purpose provided these are merely plain-vanilla financial products,? the RBI said in a statement.
However, banks should ensure that their foreign branches or subsidiaries, dealing with such products in foreign jurisdictions, have adequate knowledge, understanding, and risk management capability for handling such products, the RBI said. ?Such products should also be appropriately captured and reported in the extent off-site returns furnished to the RBI. These products would also attract the prudential norms such as capital adequacy, credit exposure, periodical valuation, and all other applicable norms. In case the current RBI norms do not specify prudential treatment of such financial products, it would be incumbent upon the banks to seek specific RBI guidance in the matter, the notification said.
If, however, the foreign branches or subsidiaries of the Indian banks propose to handle structured financial products, banks should obtain prior approval of the RBI for the purpose by furnishing full particulars of these products including their regulatory treatment prescribed by the host-country regulators for capital adequacy, valuation, pricing, exposure norms, among others.
