RBI/2009-10/225
DBOD.No.FSD.BC. 60/24.01.001/2009-10
November 16, 2009
All Scheduled Commercial Banks
(excluding RRBs)
Dear Sir/Madam
Marketing/distribution of mutual fund/insurance etc., products by banks
Please refer to our Master Circular on Para-banking activities (Circular No.
DBOD. No.FSD.BC 18/ 24.01.001/ 2009-10 dated July 1, 2009).
- In terms of paragraph 7 thereof, banks have been advised that they can enter
into agreements with mutual funds for marketing the mutual fund units subject to
certain terms and conditions. Similarly, in terms of paragraph 12 of the above
Master Circular, banks have been advised that they need not obtain prior
approval of the RBI for engaging in insurance agency business or referral
arrangement without any risk participation, subject to the conditions stipulated
in Annex 4 of the Master Circular. Banks have also been permitted, vide
paragraph 17 of the above circular, to offer purely referral services on a
non-risk participation basis to their customers, for financial products subject
to certain conditions. In addition to the above, banks also provide
non-discretionary Investment Advisory Services to their clients for which
approvals are granted by us on a case-to-case basis. Further, in some cases,
banks have also been permitted to offer discretionary Portfolio Management
Services, through their subsidiaries, subject to certain conditions.
- In all the activities referred to above, it is likely that banks may be
marketing/referring, several competing products of various mutual
fund/insurance/financial companies to their customers. Keeping in view the need
for transparency in the interest of the customers to whom the products are being
marketed/referred, it has since been decided that banks should disclose to the
customers, details of all the commissions/other fees (in any form) received, if
any, from the various mutual fund/insurance/other financial companies for
marketing/referring their products.
- The above instructions will come into force with immediate effect.
Yours faithfully
(P.Vijaya Bhaskar)
Chief General Manager-in-Charge