{"id":177122,"date":"2025-09-20T19:18:06","date_gmt":"2025-09-20T13:48:06","guid":{"rendered":"https:\/\/www.practicemock.com\/blog\/?p=177122"},"modified":"2025-09-20T19:22:19","modified_gmt":"2025-09-20T13:52:19","slug":"what-is-para-banking","status":"publish","type":"post","link":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/","title":{"rendered":"What is Para Banking? Get Complete Information"},"content":{"rendered":"<div class=\"yoast-breadcrumbs\"><span><span><a href=\"https:\/\/www.practicemock.com\/blog\/\">Home<\/a><\/span> \u00bb <span><a href=\"https:\/\/www.practicemock.com\/blog\/category\/banking-awareness\/\">Banking Awareness<\/a><\/span> \u00bb <span class=\"breadcrumb_last\" aria-current=\"page\">What is Para Banking? Get Complete Information<\/span><\/span><\/div>\n\n\n<p>In the evolving landscape of financial services, banks are no longer confined to traditional roles like accepting deposits and issuing loans. To meet the growing demands of customers and diversify their revenue streams, banks have ventured into a broader spectrum of financial activities known as <strong>Para Banking<\/strong>. These services, though not part of core <a href=\"https:\/\/www.practicemock.com\/blog\/types-of-banks-in-india\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>banking functions<\/strong><\/a>, are crucial in shaping the modern banking ecosystem. This is a topic that can be asked in the general awareness section of banking exams like SBI PO, IBPS PO, LIC AAO that too mostly in the mains exam.<\/p>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/www.practicemock.com\/lic-aao-test-series\/?ref=14325\" target=\"_blank\" rel=\"noreferrer noopener\">Take a free Full-Length LIC AAO 2025 Mock Test <\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>&nbsp;What Is Para Banking?<\/strong><\/h2>\n\n\n\n<p><strong>Para Banking<\/strong> refers to the financial services and activities that banks undertake <strong>in addition to their regular banking operations<\/strong>. These include services like insurance, mutual funds, portfolio management, leasing, and more. While core banking revolves around deposit-taking and lending, para banking encompasses a wide array of auxiliary financial services that enhance customer experience and contribute to the bank\u2019s profitability.<\/p>\n\n\n\n<p>The term is derived from the prefix \u201cpara,\u201d meaning \u201cbeside\u201d or \u201cbeyond,\u201d indicating that these services exist alongside traditional banking functions.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Regulatory Framework<\/strong><\/h2>\n\n\n\n<p>Para-banking activities are governed by the <strong>Reserve Bank of India (RBI)<\/strong> under <strong>Section 19(1) of the Banking Regulation Act, 1949<\/strong>. This section allows banks to form subsidiaries to carry out financial services beyond their core functions. However, banks must obtain prior approval from the RBI before engaging in any para-banking activity.<\/p>\n\n\n\n<p>Key regulatory highlights include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Banks can invest up to <strong>10% of their paid-up capital and reserves<\/strong> in subsidiaries offering para-banking services.<\/li>\n\n\n\n<li>Activities must comply with RBI guidelines and cannot compromise the safety or soundness of the bank.<\/li>\n\n\n\n<li>Banks may offer these services either <strong>departmentally<\/strong> or through <strong>subsidiaries and joint ventures<\/strong>.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Scope of Para Banking Activities<\/strong><\/h2>\n\n\n\n<p>Para banking covers a wide range of financial services. These services are designed to complement the bank\u2019s core offerings and provide customers with a one-stop financial solution. Below is a detailed look at the major para-banking activities permitted by the RBI:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>1. Credit and Debit Card Services<\/strong><\/h3>\n\n\n\n<p>Banks issue global credit and debit cards that allow customers to transact both domestically and internationally. These cards often come with value-added services like reward programs, insurance coverage, and concierge services.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>2. Portfolio Management Services (PMS)<\/strong><\/h3>\n\n\n\n<p>Banks offer PMS to manage investments on behalf of clients. These services include asset allocation, risk assessment, and performance tracking, tailored to individual financial goals.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>3. Insurance Services<\/strong><\/h3>\n\n\n\n<p>Banks partner with insurance companies to distribute <strong>life and non-life insurance products<\/strong>. This model, known as <strong>Bancassurance<\/strong>, allows customers to purchase insurance policies directly through their bank.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>4. Mutual Fund Distribution<\/strong><\/h3>\n\n\n\n<p>Banks act as distributors for mutual fund schemes, enabling customers to invest in equity, debt, and hybrid funds. Some banks also have their own asset management companies (AMCs).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>5. Pension Fund Management<\/strong><\/h3>\n\n\n\n<p>Banks manage pension funds for individuals and institutions. For example, <strong>SBI Pension Funds Pvt Ltd<\/strong> is a subsidiary of the State Bank of India that handles pension fund operations under the National Pension System (NPS).<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>6. Money Market Mutual Funds<\/strong><\/h3>\n\n\n\n<p>These funds invest in short-term debt instruments and are ideal for investors seeking liquidity and low risk. Banks facilitate access to these funds for retail and institutional clients.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>7. Infrastructure Debt Funds<\/strong><\/h3>\n\n\n\n<p>Banks sponsor infrastructure debt funds to finance long-term infrastructure projects. These funds help bridge the gap between public funding and private investment in sectors like roads, energy, and urban development.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>8. Venture Capital Investments<\/strong><\/h3>\n\n\n\n<p>Banks invest in <strong>Venture Capital Funds (VCFs)<\/strong> to support startups and emerging businesses. These investments are high-risk but offer potential for high returns and innovation-led growth.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>9. Underwriting of Bonds<\/strong><\/h3>\n\n\n\n<p>Banks underwrite bonds issued by <strong>Public Sector Undertakings (PSUs)<\/strong>, ensuring that these entities can raise capital efficiently. This activity also contributes to the development of the corporate bond market.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>10. Equipment Leasing and Factoring<\/strong><\/h3>\n\n\n\n<p>Banks offer leasing services for machinery, vehicles, and other business assets. <strong>Factoring<\/strong> involves purchasing receivables from businesses, providing them with immediate liquidity.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>11. Retailing of Government Securities<\/strong><\/h3>\n\n\n\n<p>Banks facilitate the sale of government securities to retail investors, promoting financial inclusion and broadening the investor base for sovereign debt.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>12.&nbsp; Referral Services<\/strong><\/h3>\n\n\n\n<p>Banks refer customers to third-party financial service providers for products like loans, insurance, and investment advisory, earning commission-based income.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>13. Safety Net Schemes<\/strong><\/h3>\n\n\n\n<p>These schemes provide financial protection to customers in case of unforeseen events, such as job loss or medical emergencies. Banks may offer these in collaboration with insurers.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>14. Primary Dealership Business<\/strong><\/h3>\n\n\n\n<p>Banks act as primary dealers in government securities, participating in auctions and providing liquidity in the secondary market.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Examples of Para Banking Subsidiaries<\/strong><\/h2>\n\n\n\n<p>Many leading banks in India have established subsidiaries to offer para-banking services. Some notable examples include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>SBI Mutual Fund<\/strong> \u2013 Asset management arm of State Bank of India<\/li>\n\n\n\n<li><strong>ICICI Prudential Life Insurance<\/strong> \u2013 Joint venture between ICICI Bank and Prudential plc<\/li>\n\n\n\n<li><strong>HDFC Securities<\/strong> \u2013 Brokerage and investment services subsidiary of HDFC Bank<\/li>\n\n\n\n<li><strong>ICICI Ventures<\/strong> \u2013 Venture capital arm of ICICI Bank<\/li>\n<\/ul>\n\n\n\n<p>These entities operate under strict regulatory oversight and contribute significantly to the parent bank\u2019s overall business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Conclusion<\/strong><\/h2>\n\n\n\n<p>Para banking represents a strategic expansion of banking services beyond traditional boundaries. By offering a diverse range of financial products, banks can cater to the holistic needs of their customers while enhancing their own competitiveness and profitability. Governed by RBI regulations, para banking ensures that innovation and diversification in financial services are achieved without compromising systemic stability.<\/p>\n\n\n\n<p>As the financial landscape continues to evolve, para banking will play an increasingly vital role in shaping the future of banking in India. For more such information, you can subscribe to our banking sources.&nbsp;<\/p>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-vivid-cyan-blue-background-color has-background wp-element-button\" href=\"https:\/\/www.practicemock.com\/lic-aao-test-series\/?ref=14325\" target=\"_blank\" rel=\"noreferrer noopener\">Take a free Full-Length LIC AAO 2025 Mock Test <\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<p><em><strong>Join our exclusive Telegram group where our experts are ready to answer all your queries, guide you in banking exam preparation, and give personalised tips to boost your success. Get access to real-time solutions, expert advice, and valuable resources to improve your study journey. <\/strong><\/em><\/p>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link has-white-color has-vivid-red-background-color has-text-color has-background wp-element-button\" href=\"https:\/\/t.me\/bankgovtjobexamprep\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>PracticeMock Telegram group Link<\/strong><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.practicemock.com\/?next=https%3A%2F%2Fwww.practicemock.com%2Fs1pricing%2Findex.php%3Fc%3Dpremium&amp;ref=14325\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"1141\" height=\"629\" src=\"https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/08\/New-Banking-Packages-Banner-26.png\" alt=\"\" class=\"wp-image-170584\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">See What a Successful Candidate has to Say<\/h2>\n\n\n\n<figure class=\"wp-block-image size-full\"><a href=\"https:\/\/www.practicemock.com\/blog\/success-story-of-veerendra-pichuka-cleared-sbi-po\/#:~:text=Here%20we%20are%20publishing%20Veerendra,give%20attempt%20in%20banking%20exams.\" target=\"_blank\" rel=\"noreferrer noopener\"><img loading=\"lazy\" decoding=\"async\" width=\"1605\" height=\"1073\" src=\"https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/08\/FI_Success_Story_01_150622-1-1.png\" alt=\"\" class=\"wp-image-165183\"\/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">FAQs<\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1758374536056\"><strong class=\"schema-faq-question\"><strong>Can banks perform any para-banking activity they want?<\/strong><\/strong> <p class=\"schema-faq-answer\">No. Banks must get prior approval from the RBI before offering para-banking services.<br\/><\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1758374991653\"><strong class=\"schema-faq-question\">Why do banks offer para-banking services?<\/strong> <p class=\"schema-faq-answer\">To <strong>diversify revenue<\/strong>, meet customer demands, and stay competitive in the financial ecosystem.<br\/><\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1758375022521\"><strong class=\"schema-faq-question\">Can customers open current accounts under para banking?<\/strong> <p class=\"schema-faq-answer\">No. Para banking does <strong>not include traditional account services<\/strong> like current or savings accounts.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1758375042470\"><strong class=\"schema-faq-question\"><strong>Do all banks offer para banking?<\/strong><\/strong> <p class=\"schema-faq-answer\">Most major banks in India do, often through subsidiaries like <strong>SBI Mutual Fund<\/strong>, <strong>ICICI Prudential<\/strong>, or <strong>HDFC Securities<\/strong>.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1758375082939\"><strong class=\"schema-faq-question\">Is Para Banking the same as regular banking?<\/strong> <p class=\"schema-faq-answer\">No. Regular banking involves deposits, withdrawals, and loans. Para banking includes <strong>non-core financial services<\/strong> like insurance, mutual funds, and investment management.<br\/><\/p> <\/div> <\/div>\n","protected":false},"excerpt":{"rendered":"<p>know what your bank does apart from the regular services. Explore the para banking concept along with examples. <\/p>\n","protected":false},"author":33,"featured_media":177123,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[3998],"tags":[],"class_list":["post-177122","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banking-awareness"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is Para Banking? Get Complete Information<\/title>\n<meta name=\"description\" content=\"know what your bank does apart from the regular services. 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Having prepared for exams like SBI PO, Clerk, and other banking and insurance exams, I understand the mindset, challenges, and strategies needed to crack them. My journey from exam halls to content creation is fueled by a deep curiosity and an unquenchable thirst for learning. I believe in growing continuously and exploring new knowledge across fields, making every piece of content both insightful and relatable for aspirants.","url":"https:\/\/www.practicemock.com\/blog\/author\/muskan\/"},{"@type":"Question","@id":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758374536056","position":1,"url":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758374536056","name":"Can banks perform any para-banking activity they want?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"No. Banks must get prior approval from the RBI before offering para-banking services.<br\/>","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758374991653","position":2,"url":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758374991653","name":"Why do banks offer para-banking services?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"To <strong>diversify revenue<\/strong>, meet customer demands, and stay competitive in the financial ecosystem.<br\/>","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758375022521","position":3,"url":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758375022521","name":"Can customers open current accounts under para banking?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"No. Para banking does <strong>not include traditional account services<\/strong> like current or savings accounts.","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758375042470","position":4,"url":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758375042470","name":"Do all banks offer para banking?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"Most major banks in India do, often through subsidiaries like <strong>SBI Mutual Fund<\/strong>, <strong>ICICI Prudential<\/strong>, or <strong>HDFC Securities<\/strong>.","inLanguage":"en-US"},"inLanguage":"en-US"},{"@type":"Question","@id":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758375082939","position":5,"url":"https:\/\/www.practicemock.com\/blog\/what-is-para-banking\/#faq-question-1758375082939","name":"Is Para Banking the same as regular banking?","answerCount":1,"acceptedAnswer":{"@type":"Answer","text":"No. Regular banking involves deposits, withdrawals, and loans. Para banking includes <strong>non-core financial services<\/strong> like insurance, mutual funds, and investment management.<br\/>","inLanguage":"en-US"},"inLanguage":"en-US"}]}},"uagb_featured_image_src":{"full":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",1200,675,false],"thumbnail":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",150,84,false],"medium":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",300,169,false],"medium_large":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",640,360,false],"large":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",640,360,false],"1536x1536":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",1200,675,false],"2048x2048":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",1200,675,false],"web-stories-poster-portrait":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",640,360,false],"web-stories-publisher-logo":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",96,54,false],"web-stories-thumbnail":["https:\/\/www.practicemock.com\/blog\/wp-content\/uploads\/2025\/09\/What-is-Para-Banking.png",150,84,false]},"uagb_author_info":{"display_name":"Muskan Sharma","author_link":"https:\/\/www.practicemock.com\/blog\/author\/muskan\/"},"uagb_comment_info":0,"uagb_excerpt":"know what your bank does apart from the regular services. Explore the para banking concept along with examples.","_links":{"self":[{"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/posts\/177122","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/users\/33"}],"replies":[{"embeddable":true,"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/comments?post=177122"}],"version-history":[{"count":0,"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/posts\/177122\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/media\/177123"}],"wp:attachment":[{"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/media?parent=177122"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/categories?post=177122"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.practicemock.com\/blog\/wp-json\/wp\/v2\/tags?post=177122"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}