Reviews suitability of such conglomerates
The Reserve Bank of India (RBI) posted a discussion paper on its web site on Monday (27 August 2007) to review aspects of bank and financial holding company structures and how suitable they are for India.
The discussion paper comes at a time when State Bank of India (SBI) and ICICI Bank have announced plans to create a holding company to raise capital for their insurance and asset management businesses.
According to RBI, the pace of growth in financial services had led banks to experiment with holding company structures not yet familiar in India.The typical structure for banks in India was the bank subsidiary model, under which non-banking activities are carried out by separate subsidiaries floated by the bank.
Developing bank holding companies in India would require banking laws to be amended, but allowing financial holding companies, which put another level of ownership between the parent bank and its financial subsidiaries, might require a separate act.
Therefore, the central bank wanted to review and assess their legal, regulatory and accounting suitability and highlight the regulatory and supervisory concerns emanating from such structures