Banking · Para-Banking Activities
Investment banking and para-banking activities represent the diversification of traditional commercial banking into sophisticated financial services. While investment banking involves capital raising and advisory, para-banking includes activities like insurance and mutual fund distribution. Which of the following best describes the regulatory constraints and operational nature of these activities for a commercial bank in India?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Investment banking is strictly limited to providing locker services and gold loans to high-net-worth individuals to ensure low risk for the bank.
- 2Underwriting of public issues is a mandatory para-banking activity that all scheduled commercial banks must perform as per the Banking Regulation Act.
- 3Para-banking activities such as insurance brokerage require prior approval from the RBI and must be conducted through a subsidiary or a departmental setup with strict arm's length distance.✓
- 4Commercial banks can conduct investment banking activities directly within their own legal entity without any capital adequacy requirements from SEBI.
Correct answer
Para-banking activities such as insurance brokerage require prior approval from the RBI and must be conducted through a subsidiary or a departmental setup with strict arm's length distance.
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