RBI Sets Holding Co Rider for Bank Licence

The Reserve Bank of India will allow a promoter or a promoter group to establish new banks if they set up a holding company, which will own the bank and all other financial services companies regulated by the central bank or other financial sector regulators.   The holding company structure is described in the draft guidelines that the central bank has sent to the finance ministry last week. The guidelines are not final but provide a clue to its thinking. The norms governing new banks will be made public once the finance ministry responds. Such a structure is aimed to ring fence the regulated financial services activities of an industrial house, including the new bank, from other activities such as manufacturing and trading that are not regulated by financial sector regulators.   In his Budget speech, the finance minister had said the Reserve Bank of India would release a set of rules governing new banks before March 31. The rules will come into force only after a public discussion.