RBI issues discussion paper on holding companies in banking

New Delhi, Aug 27 (UNI) 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.

UNI