Banks do not need RBI permission to invest, pull back overseas investments

Indian commercial banks will no longer require the Reserve Bank of India’s (RBI) nod to invest or withdraw funds from their overseas branches and subsidiaries.

In the additional measures announced after the monetary policy review governor Shaktikanta Das said banks will no longer need regulatory clearance to invest or repatriate capital from their overseas subsidiaries.

“At present, banks incorporated in India can infuse capital in their overseas branches and subsidiaries; retain profits in these centres; and repatriate/ transfer profits therefrom with prior approval of the RBI. With a view to providing operational flexibility to banks, it has been decided that banks need not seek prior approval of the RBI if they meet the regulatory capital requirements,” Das announced in his post policy statement.

To be sure, banks have been reducing their exposure to their overseas branches and subsidiaries as they focus on their domestic operations post the 2008 financial crisis.

The central bank will also place a discussion paper to review and update prudential norms on classification and valuation of investment portfolio by scheduled commercial banks. These norms were last reviewed in October 2000. “In view of the significant developments since then in domestic financial markets and global standards/best practices in this area, a need has been felt to review and update these norms following a consultative process,” Das said.


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