Banks offering investment advisory services through subsidiary should avoid conflict of interest: RBI

Mumbai, Apr 22 (KNN) The Reserve Bank has asked the banks that the investment advisory services (IAS) provided by the bank sponsored subsidiaries should only be for the products and services in which banks are permitted to deal in as per Banking Regulation Act, 1949.

RBI said the banks offering investment advisory services (IAS) through a separate subsidiary should avoid any conflict of interest.

“IAS is defined and regulated by SEBI under the SEBI (Investment Advisors) Regulations, 2013, and entities offering these activities need to be registered with SEBI,” it said in a notification.

In view of the same, it is advised that henceforth banks cannot undertake IAS departmentally,” the RBI said in a notification. “Accordingly, banks desirous of offering these services may do so either through a separate subsidiary set up for the purpose or one of the existing subsidiaries after ensuring that there is an arm’s length relationship between the bank and the subsidiary,” it added.

The notification said that the sponsor bank should obtain specific prior approval from the Department of Banking Regulation before offering IAS through an existing subsidiary or for setting up a subsidiary for this purpose, he said.

These subsidiaries offering IAS will be registered and regulated by SEBI.