New Delhi: The Reserve Bank of India’s guidelines on commercial banks’ financial services businesses permitting overlapping lending activities within bank groups averted the need for major restructuring by 12 bank groups, a report said on Tuesday.
The final guidelines aim to eliminate any regulatory arbitrage by aligning regulations across bank group entities, thus contributing to structural strengthening, while providing flexibility in business conduct, the report from Crisil Ratings said.
Together, these banks accounted for about 55 per cent of sectoral advances.
Earlier, draft guidelines released in October 2024 had proposed that only one bank group entity could carry out a specific form of business, with no overlap in lending activities between the bank and its group entities.
The central bank retained several draft proposals, including the applicability of upper‑layer scale‑based regulations for non‑banking financial companies (NBFCs), regulatory restrictions on loans and advances, and a 20 per cent ceiling on a bank group’s holding in an asset reconstruction company (ARC).
“If the draft guidelines had been implemented in toto, 12 bank groups, accounting for 55 per cent of sectoral advances, would have needed restructuring of their lending businesses. This would have impacted 2-6 per cent of consolidated advances of these individual banks,” Crisil Ratings Director Subha Sri Narayanan said.
“However, with the final guidelines permitting bank group entities to maintain overlapping lending businesses, subject to Board approval, there will be no disruption to their operations. More significantly, banks and their group entities can continue to leverage their respective strengths and serve distinct customer segments in a cost-effective manner,” she added.
Crisil Ratings Associate Director Vani Ojasvi said that there are currently 13 ARCs in which one or more banks hold stakes of over 20 per cent. Wherever the shareholding exceeds this prescribed limit, banks will have to partially divest by March 2028.
The guidelines have also applied restrictions on specific loan segments for bank group entities, akin to those for banks, to align risks across entities and curb regulatory arbitrage.
(IANS)
