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Date : 27 Aug 2007
RBI Discussion Paper on Holding Companies in Banking Groups

The Reserve Bank of India today placed on its website discussion paper on holding companies in banking groups for comments from the public. Comments may be sent within three weeks to Chief General Manager-in-Charge, Department of Banking Operations and Development, Reserve Bank of India, Central Office , Shahid Bhagat Singh Marg,
Mumbai - 400 001 or may be emailed.

It may be noted that in many countries, deregulation and financial consolidation have led to the development of Financial Holding Companies-allowing commercial banking, insurance, investment banking and other financial activities to be conducted under the same corporate umbrella. There are several ways of conducting different financial services in the same organisation using different conglomerate models, viz., 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. In this context, it is considered opportune to take a review of some of the conglomerate structures and assess their suitability for the country given the prevailing legal, regulatory and accounting framework and highlight the regulatory and supervisory concerns emanating from such structures. The Reserve Bank of India has prepared the discussion paper on holding companies in banking groups in this context. The Reserve Bank would take a policy view in the matter based on the comments received.

Alpana Killawala
Chief General Manager

Press Release: 2007-2008/290

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