RBI/2017-18/66
DBR.No.FSD.BC.89/24.01.040/2017-18
September
25, 2017
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir/ Madam,
Amendments to Master Direction-
Reserve Bank of India (Financial Services provided by Banks) Directions,
2016
Considering the suggestions and
queries received from SEBI, banks and other stakeholders, Reserve Bank of
India has decided to make certain amendments to Master Direction - Reserve Bank of
India (Financial Services provided by Banks) Direction
No.DBR.FSD.No.101/24.01.041/2015-16 dated May 26, 2016. In pursuance
of these changes, Para 5(a)(v) of the Master Direction on Financial
Services provided by Banks is amended to read as under:
“v. No bank shall
a) Hold more than 10 per cent in
the equity of a deposit taking NBFC.
Provided that this does not
apply to a housing finance company.
b) Make an investment of more
than 10 per cent of the unit capital of a Real Estate Investment
Trust/Infrastructure Investment Trust subject to overall ceiling of 20 per
cent of its net worth permitted for direct investments in shares,
convertible bonds/ debentures, units of equity-oriented mutual funds and
exposures to Alternative Investment Funds.
c) Hold more than 10 per cent of
the paid up capital of a company, not being its subsidiary engaged in
non-financial services or 10 per cent of the bank’s paid up capital and
reserves, whichever is lower.
Provided investments in excess
of 10 per cent but not exceeding 30 per cent of the paid up share capital
of such investee company shall be permissible in the following
circumstances:
i.
the
investee company is engaged in non-financial activities permitted for banks
in terms of Section 6(1) of the Banking Regulation Act, 1949; or
ii.
the
additional acquisition is through restructuring of debt or to protect the
banks’ interest on loans/investments made to a company. The bank shall
submit a time bound action plan for disposal of such shares within a
specified period to RBI.
d) Hold along with its
subsidiaries, associates or joint ventures or entities directly or indirectly
controlled by the bank; and mutual funds managed by Asset Management
Companies (AMCs) controlled by the bank, more than 20 per cent of the paid
up share capital of an investee company engaged in non-financial services.
However, this cap does not apply to the cases mentioned at 5(a)(v)(c)(i)
and (ii) above.
e) Make any investment in a
Category III Alternative Investment Fund (AIF). Investment by a bank’s
subsidiary in a Category III AIF shall be restricted to the regulatory
minima prescribed by SEBI.”
2. Para 5(a)(vi)(b) is being
amended to read as under:
“investments in excess of 10 per
cent in non-financial companies acquired in circumstances as mentioned at 5
(a) (v) (c) (ii) above.”
3. Para 5(b)(i)(b) is being
amended to read as under:
“The bank has the minimum
prescribed capital (including Capital Conservation Buffer) and has also
made a net profit in that immediate preceding financial year; and.”
4. Section 5(b)(i)(d) is being
amended to read as under:
“The aggregate shareholding of
the bank along with shareholdings, if any, by its subsidiaries or joint
ventures or other entities directly or indirectly controlled by the bank,
is less than 20 per cent of the investee company’s paid up capital.
Explanation: Prior approval of
RBI shall not be required if the investments in the financial services
companies are held under the ‘Held for Trading’ category and are not held
beyond 90 days.”
5. In Para 5(b), the following
is being added as (iii):
“(iii) investment of more than
10 per cent of the paid up capital/ unit capital in a Category I/ Category
II Alternative Investment Fund.”
6. A new Para 5(c) is being
inserted after Para 5(b), which reads as under:
“Banks shall ascertain the risks
arising on account of equity investments in Alternative Investment Funds
done directly or through their subsidiaries, within the Internal Capital
Adequacy Assessment Process (ICAAP) framework and determine the additional
capital required which will be subject to supervisory examination as part
of Supervisory Review and Evaluation Process. This shall also be applicable
to sponsoring of Infrastructure Debt Funds by banks.”
7. The explanation to Para 7(d)
is being amended to read as under:
“Explanation: This shall not
apply to the investments made by a Category I and II AIF set up by the
subsidiary.”
8. Section 14(a)(ii) is being
amended to read as under:
“It has the minimum prescribed
capital (including Capital Conservation Buffer) after investment.”
9. Section 14(b)(ii) is being
amended to read as under:
“It complies with conditions
stated at 14 (a) ii, iii, iv and v.”
10. Para 14(c) is being amended
to read as under:
“Insurance broking services
departmentally:
A bank may, at its option, act
as an insurance broker departmentally subject to the conditions mentioned
under Section 18(d) on insurance agency business.”
11. Section 15(ii) is being
amended to read as under:
“It has the minimum prescribed
capital (including Capital Conservation Buffer) after investment.”
12. Section 21(a)(ii) is being
amended to read as under:
“It has the minimum prescribed
capital (including Capital Conservation Buffer)”.
13. A new Para 21(c) is being
inserted after Para 21(b), which reads as under:
“No bank shall become a
Professional Clearing Member of the commodity derivatives segment of SEBI
recognised exchanges unless it satisfies the prudential criteria (as given
in Para 21(a) (i) to (iv)) and shall do so subject to the following
conditions:
i.
The
bank shall satisfy the membership criteria of the stock exchanges and
comply with the regulatory norms laid down by SEBI and the respective stock
exchanges.
ii.
The
bank shall, with the approval of Board, put in place effective risk control
measures, prudential norms on risk exposure in respect of each of its
trading members, taking into account their net worth, business turnover,
etc.
iii.
The
bank shall not undertake trading in the derivative segment of the commodity
exchange on its own account and shall restrict itself only to clearing and
settlement transactions done by the trading members/ clients on the
exchange.
iv.
The
bank shall take exposure on its trading members as per the policy approved
by its board.
v.
The
bank may fulfill pay-in obligations arising out of trades executed by its
clients, as clearing member of the exchange subject to the condition that
the total exposure which the bank would take on its registered clients
should be determined by the Board in relation to the net worth of the bank
and should be monitored regularly. However, the bank shall not meet pay-in
obligations of any transaction other than what is required in its role as a
Professional Clearing Member.
vi.
The
bank shall ensure strict compliance with various margin requirements as may
be prescribed by the Bank’s board or the Commodity Exchanges as also the
extant RBI guidelines regarding guarantees issued on behalf of commodity
brokers.”
14. A new Para 22 is being
inserted in the MD which reads as under:
“22. Broking services for
Commodity Derivatives Segment
(a) No bank shall offer broking
services for the commodity derivatives segment of SEBI recognised stock
exchanges except through a separate subsidiary set up for the purpose or
one of its existing subsidiaries and shall do so subject to the following
conditions:
i.
The
subsidiary shall, with the approval of its Board, put in place effective
risk control measures including prudential norms on risk exposure in
respect of each of its clients, taking into account their net worth,
business turnover, etc.
ii.
The
subsidiary shall not undertake proprietary positions in the commodity
derivatives segments.
iii.
The
subsidiary shall ensure strict compliance with various margin requirements
as may be prescribed by SEBI, its own board or the Commodity Exchanges.”
15. The Master Direction has
been suitably updated.
(Dr. S K Kar)
Chief General Manager
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