RBI Update: Operations of subsidiaries and branches of Indian banks and All India Financial Institutions (AIFIs) in foreign jurisdictions and in International Financial Services Centers (IFSCs) - Compliance with statutory/regulatory norms dated 1st December, 2022

Reserve Bank of India vide its Circular dated 1 st December, 2022 having regard to the circular DBOD.No.BP.BC.89/21.04.141/2008-09 dated December 1, 2008 and circular DBOD.No.BP.BC.111/21.04.157/2013-14 dated May 12, 2014 issued instructions to Indian banks and AIFIs on the issue of dealing in financial products by their branches/subsidiaries operating outside India. On a review, it was felt that a framework needs to be in place to allow them to undertake activities which are not specifically permitted in the Indian domestic market and also to specify the applicability of these instructions to International Financial Services Centers (IFSCs) in India including Gujarat International Finance Tec-City (GIFT City).

Applicability and commencement These directions are applicable to all banks regulated by the Reserve Bank (excluding co-operative banks, Regional Rural Banks and Local Area Banks) and All India Financial Institutions (AIFIs) and shall come into immediate effect. Dealing in financial products The foreign branches/foreign subsidiaries of Indian banks/AIFIs can deal in financial products, including structured financial products, which are not available or are not permitted by the Reserve Bank in the domestic market without prior approval of Reserve Bank, subject to compliance with conditions specified below in paragraph 3 and those prescribed by the host regulator. Further, the branches/subsidiaries of Indian banks/AIFIs operating in IFSCs including those operating out of GIFT City may also deal in financial products, including structured financial products, which are not available or are not permitted by the Reserve Bank in the domestic market subject to compliance with all applicable laws/regulations and conditions stipulated below in paragraph 3 and those prescribed by the host regulator. Conditions for dealing in financial products While allowing branches/ subsidiaries in foreign jurisdictions as well as in IFSCs to deal in such products, the parent Indian bank/AIFI shall ensure that: dealing in such products is done with the prior approval from their Board and, if required, the appropriate authority in the concerned jurisdictions.they have adequate knowledge, understanding, and risk management capability for handling such products.they act as market makers for products only if they have the ability to price/value such products and the pricing of such products is demonstrable at all times.their exposure and mark-to-market (MTM) on these