RBI issues discussion paper on holding companies in banking

Monday, 27 August , 2007, 14:38

New Delhi: The Reserve Bank of India today placed on its website a
discussion paper on holding companies in banking groups for comments
from the public.

Comments may be sent within three weeks, a statement said.

RBI's move comes after in many countries, deregulation and financial
consolidation have led to the development of Financial Holding
Companies. These holding companies allow commercial banking,
insurance, investment banking and other financial activities to be
conducted under the same corporate umbrella.

According to RBI, there are several ways of conducting different
financial services in the same organisation using different
conglomerate models, namely the Universal Bank, the Bank Subsidiary
Model and the Bank Holding Company model.

The financial services sector in India has been witnessing a growth in
the emergence of financial conglomerates. With the enlargement in the
scope of the financial activities driven by the need for
diversification of business lines to control the enterprise-wide risk,
some of the players are experimenting with structures so far
unfamiliar in India, RBI said.

In this context, RBI considered it opportune to take a review of some
of the conglomerate structures and assess their suitability for the
India.

The RBI has prepared the discussion paper on holding companies in
banking groups in this context and will take a policy view in the
matter based on the comments received.