Business News Desk: The Reserve Bank of India (RBI) on Friday said banks need to avoid using group entities to circumvent the rules applicable to them. The central bank made this suggestion in a draft circular on ‘Prudential Regulation for Trading Patterns and Investments’ released on Friday. “A group entity should not be used to circumvent the rules/guidelines applicable to the parent bank or other group entity to carry out any business activity which is not normally permitted,” the draft said.
The circular said that these units should avoid duplication of loan activities provided by the bank and its group units. The draft suggested that banks will have to approach the regulation department of RBI to start any new activity through a group entity other than those already permitted. In case of NOFHC, it should be ensured that only one entity within the NOFHC undertakes a particular business or activity.
