➡ What is Para Banking Activity?
Banks can undertake certain eligible financial services or activities either departmentally or by setting up subsidiaries is called Para Banking. We could also define Para banking activities as the activities which are done by a Bank apart from its normal day to day activities (like deposit, withdrawal etc.)
Para banking activities are the activities carried out by the bank which are apart from its normal day-to-day activities.
The normal day-to-day activities involve deposits, withdrawals, giving credit, etc.
But this does not mean that bank can go for any type of activity by its own. The Para Banking activities which can be performed by bank have been permitted by RBI. Banks can do these activities either departmentally or by setting up subsidiaries to undertake the type of business.
The Para Banking activities are such as insurance business, portfolio management services, to become pension fund managers, mutual funds business, money market mutual funds, underwriting of bonds of PSUs, investment in venture capital funds, etc.
Banks must follow the whole set of guidelines as given by RBI.
Activities of Indian Banks which come under Para Banking are as follows
1- Banks’ investment in Venture Capital Funds (VCFs)
2- Banks as sponsors to Infrastructure Debt Funds
3- Equipment leasing, Hire purchase business and Factoring services
4- Primary Dealership business
5- Underwriting of Corporate Shares and Debentures
6- Underwriting of bonds of Public Sector Undertakings
7- Retailing of Government Securities
8- Mutual Fund Business
9- Money Market Mutual Funds
10- (MMMFs)Cheque Writing Facility for Investors of MMMFs
11- Insurance business Pension Fund Management (PFM) by banks
12- Referral Services
13- Membership of SEBI approved Stock Exchanges Portfolio Management services
14- Safety Net’ Schemes
15- Disclosure of commissions/ remunerations