New Delhi, Dec 9 (IANS) The Reserve Financial institution of India’s tips on industrial banks’ monetary providers companies allowing overlapping lending actions inside financial institution teams averted the necessity for main restructuring by 12 financial institution teams, a report stated on Tuesday.
The ultimate tips goal to get rid of any regulatory arbitrage by aligning laws throughout financial institution group entities, thus contributing to structural strengthening, whereas offering flexibility in enterprise conduct, the report from Crisil Scores stated.
Collectively, these banks accounted for about 55 per cent of sectoral advances.
Earlier, draft tips launched in October 2024 had proposed that just one financial institution group entity might perform a particular type of enterprise, with no overlap in lending actions between the financial institution and its group entities.
The central financial institution retained a number of draft proposals, together with the applicability of higher‑layer scale‑based mostly laws for non‑banking monetary corporations (NBFCs), regulatory restrictions on loans and advances, and a 20 per cent ceiling on a financial institution group’s holding in an asset reconstruction firm (ARC).
“If the draft tips had been carried out in toto, 12 financial institution teams, accounting for 55 per cent of sectoral advances, would have wanted restructuring of their lending companies. This might have impacted 2-6 per cent of consolidated advances of those particular person banks,” Crisil Scores Director Subha Sri Narayanan stated.
“Nevertheless, with the ultimate tips allowing financial institution group entities to keep up overlapping lending companies, topic to Board approval, there will probably be no disruption to their operations. Extra considerably, banks and their group entities can proceed to leverage their respective strengths and serve distinct buyer segments in a cheap method,” she added.
Crisil Scores Affiliate Director Vani Ojasvi stated that there are at present 13 ARCs during which a number of banks maintain stakes of over 20 per cent. Wherever the shareholding exceeds this prescribed restrict, banks must partially divest by March 2028.
The rules have additionally utilized restrictions on particular mortgage segments for financial institution group entities, akin to these for banks, to align dangers throughout entities and curb regulatory arbitrage.
–IANS
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