The segregation of wealth management is aimed to avoid the conflict of interest arising from the single entity conducting both the activities of advisory or fund management activity as well as marketing.
The banks will need to get the RBI’s approval to create subsidiaries, which would be then registered with the Securities and Exchange Board of India (SEBI), a draft report by a RBI panel said.
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The report also suggests that the RBI should continue to supervise the bank’s activities done through the subsidiary.
The central bank noted that the mis-selling of products has raised serious consumer protection issues in the banking sector and exposed banks to reputational risks.
RBI has sought comment and feedback on the draft guidelines till 31 July 2013.
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