A draft report of a Reserve Bank of India (RBI) panel suggested banks to separate the business segments of wealth management and and investment advisory services by creating a subsidiary.
Further, the report, released recently, suggested that RBI must approve the creation of subsidiaries for this purpose. Such subsidiaries must be registered with the Securities and Exchange Board of India (SEBI), the report says.
The report calls for separation of both the segments in order to avoid conflict of interest as well as to address mis-selling of financial products.
The panel feels that conflict of interest could arise from the single entity conducting both the activities of advisory or fund management as well as marketing.
The panel suggested that bank must have an ‘arm’s length’ relationship with its subsidiary.
The bank’s activities done through the subsidiary must be supervised by the RBI, the report says.
Last month, the RBI said it would issue draft guidelines to address mis-selling of financial products and structure of transactions to aid tax evasion and fradulent transfer of funds.
Leave a Reply
You must be logged in to post a comment.