RBI Mulls Letting Banks Set Up Subsidiaries Without Approval
Why in the news
As part of a drive to ease doing business in finance, RBI is thinking of dropping the need for its nod when banks float subsidiaries.
Key facts
- Exceptions: insurance (IRDAI) and asset management (SEBI).
- Legal basis: Section 6 of the Banking Regulation Act, 1949, lists permitted non-core businesses.
- Segmentation idea: subsidiaries should work in segments different from the parent, e.g. affordable housing finance for a housing-loan bank.
- Next step: draft guidelines soon.
Significance
- Cuts bottlenecks and micro-management.
- Encourages segmented diversification.
Exam angle
- Section 6, Banking Regulation Act.
- Regulators for exceptions: IRDAI, SEBI.