Marketing overseas deposits needs RBI approval

Only licenced banking firms to be allowed to collect deposits.

The Reserve Bank of India (RBI) has said that all banks, including those not operating in India, should seek its approval before marketing their deposit schemes to residents in India.

Under the liberalised remittance scheme, domestic residents can invest up to $25,000 abroad for any purpose, including investing in deposits or equities and bonds.

In a late evening media statement yesterday, the RBI said, "It has been decided in the public interest that no entity other than a licenced banking company can solicit foreign currency deposits from residents."

The statement, thus, rules out all banks not having a presence in India from accepting deposits from resident Indians unless they seek the RBI's approval, "to ensure that only banking entities solicit foreign currency deposits from the public and such entities provide the minimum disclosures".

The permission would encompass all products under the scheme introduced with the objective of either soliciting foreign currency deposits for their overseas branches or for acting as agents for overseas mutual funds or any other foreign financial services company, the RBI statement said.

Moving in consumer interest after several advertisements appeared in the media soliciting foreign currency deposits or funds to be placed at overseas centres, the RBI said, "All banks, including those not have an operational presence in India should seek its prior approval."

The RBI noted that these advertisements often did not contain appropriate disclosures to guide potential investors and in some cases were marketed by entities not having operational presence in India.

The central bank said such activity raised supervisory concerns.

However, the RBI has clarified that these instructions do not restrict the freedom of resident individuals from investing in permissible capital account transactions.

As part of the disclosures required when making the applications, banks will have to mention the authority responsible for supervising their head office and the long-term rating given to it by an internationally acceptable rating agency.