Investments, removing the proposed regulatory restriction on overlap in the businesses undertaken by a bank and its group entities the main bone of contention for banks.
“The strategic allocation of business streams among group entities will be left to the wisdom of bank boards,” governor Malhotra said in what is a big relief for banks.
In October last year, RBI released draft proposals on ‘forms of business and prudential regulation for investments’ of banks, wherein it stated that only a single entity within a bank group (the bank and its group entities) can undertake a particular form of permissible business.
It specified that multiple entities within a bank group cannot undertake the same business or hold/acquire the same category of license/authorisation or registration from any financial sector regulator.
The draft norms would particularly impact private sector banks which have large non-bank subsidiaries with overlapping lending businesses.It specified that multiple entities within a bank group cannot undertake the same business or hold/acquire the same category of license/authorisation or registration from any financial sector regulator. Additionally, there can be no overlap in the lending activities undertaken by the bank and its group entities.RBI had also said that the non-bank subsidiary of banks will be considered upper layer NBFCs and will be subject to regulatory and other restrictions on loans and advances applicable to banks. The norms would apply two years after the final circular is issued by RBI. Final norms will be issued soon, governor Malhotra said on Wednesday.
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