Economics · Banking Regulation
Which of the following is a key requirement for maintaining an 'arm's length' relationship between a parent bank and its subsidiary, according to regulatory guidelines?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The parent bank is allowed to grant unsecured advances to the subsidiary without approval from the RBI.
- 2The subsidiary is allowed to have unrestricted access to the parent bank's customer accounts for business purposes.
- 3The subsidiary must seek prior approval from the RBI before setting up a new subsidiary or engaging in new business activities.✓
- 4The parent bank must directly manage the subsidiary's day-to-day operations and decision-making.
Correct answer
The subsidiary must seek prior approval from the RBI before setting up a new subsidiary or engaging in new business activities.
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