RBI Eases Bank Group Rule on Overlapping Businesses
Why in the news
After industry feedback, the Reserve Bank softened a draft norm and relaxed listing duty for bank-owned NBFCs, while adding a board-level check.
Key facts
- Main change: several entities of one bank group may carry out the same line of business.
- Conditions: they must serve different customer segments (for example geography, ticket size or customer profile), with a board-approved justification.
- Listing relief: bank-owned NBFCs not separately named NBFC-UL are exempt from mandatory listing.
- Anti-circumvention: limits on banks for certain loan segments extend to their NBFC group entities.
| Issue | 2024 draft | Now |
|---|---|---|
| Entities per business in a group | Only one | Many, with different segments and board approval |
| Listing of bank-owned NBFCs | Wider listing feared | Only identified NBFC-UL list |
Why the change
- The industry argued that group units often specialise in distinct sectors or regions.
- A blanket rule would have hurt retail lending, wealth management, payments and credit subsidiaries.
Exam angle
- Regulator: Reserve Bank of India.
- Related terms: NBFC-UL, Scale-Based Regulatory (SBR) framework.
- Upper Layer NBFCs must list within 3 years; the group has 15 members, such as Bajaj Finance, Shriram Finance, Tata Capital and HDB Financial Services.