Banking · RBI PMS Guidelines
A private sector bank plans to offer Portfolio Management Services (PMS) to its High Net Worth Individual (HNI) clients. Based on current SEBI regulations and RBI guidelines, which of the following conditions must the bank strictly adhere to regarding the minimum investment and client relationship?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank can manage funds starting from 10 lakh rupees and may use these funds to buy shares of its own subsidiaries to support their market valuation during periods of high volatility.
- 2The bank is allowed to offer a guaranteed rate of return to the PMS clients provided the investment exceeds 1 crore rupees and the funds are held for a minimum lock-in period of 3 years.
- 3The bank must accept a minimum investment of 50 lakh rupees per client and maintain a principal-agent relationship where the risk is borne entirely by the client and funds are not commingled.✓
- 4The bank must ensure a minimum client contribution of 25 lakh rupees and the funds must be placed in a common pool to ensure maximum returns through diversification across various asset classes.
Correct answer
The bank must accept a minimum investment of 50 lakh rupees per client and maintain a principal-agent relationship where the risk is borne entirely by the client and funds are not commingled.
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