The Reserve Bank of India today released the draft circular on ‘Forms of Business and Prudential Regulation for Investments’. Comments on the draft circular are invited from banks and other stakeholders by November 20, 2024.

Feedback on the draft circular may be forwarded to:

The Chief General Manager
Registration and Authorisation Group
Department of Regulation, Central Office
12th/13th Floor, Reserve Bank of India Central Office Building
Shahid Bhagat Singh Marg, Fort
Mumbai – 400001
or
by email
with subject line "Feedback on Draft circular on Forms of Business and Prudential Regulation for Investments".

Background

Paragraphs 4 and 5 of the Master Direction- Reserve Bank of India (Financial Services provided by Banks) Directions, 2016 consolidate the regulations on forms of business and prudential regulation for investments by banks. The Reserve Bank has reviewed these regulations with an objective to ringfence the banks’ core business from other risk bearing non-core businesses as well as to provide operational freedom to banks for making investments in financial services/non-financial services companies and Alternative Investment Funds.

(Puneet Pancholy)  
Chief General Manager

RBI draft circular tightens bank business forms and sets prudential investment limits, approval requirements, and ICAAP capital duties. The RBI draft circular revises permissible forms of business and prudential investment rules: core banking functions must be departmental, ring fenced activities must be undertaken through a single group entity, and prior board, risk committee and Reserve Bank approvals are required for certain activities and new group arrangements. It prescribes investment ceilings tied to paid up capital and reserves, caps on shareholdings in NBFCs, non financial companies, ARCs and AIFs, conditions and exemptions to prior approval for investments below specified thresholds, mandatory breach reporting, and ICAAP based capital assessment and group capital management obligations.