The Reserve Bank of India (RBI) has planned to introduce wealth management norms and the draft for it will be, reportedly, issued by June 2013.
These norms will regulate banks’ wealth management operations and third-party financial product distribution functions. They will also aim to strengthen know-your-customer (KYC) norms, anti-money laundering (AML) standards and rules to combat financing of terrorism.
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The central bank has said: "The Reserve Bank recently undertook investigations in the light of reported allegations that certain banks were involved in structuring transactions to aid tax evasion and fraudulent transfer of funds. The investigations revealed the need for better regulatory compliance by banks."
RBI has informed that there are banks offering wealth management services, which are exposed to reputational risks on account of mis-selling of products. The draft of the norm will be issued by the end of June, 2013.
RBI had noticed that the duties of marketing personnel weren’t clearly segregated from other branch functions. Also, bank employees were receiving incentives from third parties for selling their products. As per RBI, these will lead to mis-selling and distortion of the staff incentive structure.
RBI said it had observed while marketing third-party products as agents, banks weren’t carrying out due diligence of customers, as required under the guidelines for KYC, AML and the norms to tackle financing of terrorism.
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By GlobalDataRBI said: "Also, some banks are not filing cash transaction reports (CTRs) or suspicious transaction reports (STRs)". RBI suggested banks must ensure proper due diligence, maintain details of third-party products and file CTRs and STRs wherever required.
