The Reserve Bank on Thursday allowed with certain riders foreign branches and subsidiaries of Indian banks to deal in financial products that are not specifically permitted in the domestic market.
On a review, an RBI circular said 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).

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"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...," it said.

Similar permission has been granted to branches and subsidiaries of Indian banks/All India Financial Institutions (AIFIs) operating in IFSCs including those operating out of GIFT City.

Specifying conditions for dealing in financial products, the RBI said the banks and AIFIs will have to ensure that such branches and subsidiaries do not deal in products linked to Indian Rupee unless specifically permitted by Reserve Bank.

They cannot also accept structured deposits from any Indian resident.

Further, the financial products dealt with by the foreign branches and subsidiaries as well as IFSCs will attract prudential norms such as capital adequacy, exposure norms, periodical valuation, and all other applicable norms, the RBI said.

"Parent bank shall adhere to more stringent among the host and home regulations in respect of prudential norms," it added.

RBI also said the activities of branches/subsidiaries in foreign jurisdictions and IFSCs would be subject to the laws in India unless specifically exempted by law.