Mumbai: The Reserve Bank of India (RBI) has released draft proposals that could reshape how private banks and their subsidiaries do business. The new rules aim to prevent banks and their non-bank subsidiaries from overlapping services, which could affect major players like HDFC Bank, Axis Bank, Kotak Mahindra Bank, and Federal Bank.
Under these proposals, only one entity within a bank group can hold a particular type of business license or authorization. This move will likely impact private banks with non-banking financial subsidiaries, which may need to be reorganized to comply. For example, Axis Bank operates Axis Finance, an NBFC, while Kotak Mahindra Bank has multiple non-bank arms, including Kotak Mahindra Prime and Kotak Mahindra Investments.
Analysts from Jeffries suggest that banks with overlapping business areas could face challenges under the new framework. Meanwhile, Citi analysts have pointed out that some banks may need to rethink their business models or consider merging certain lending activities within the group. The proposed regulations would apply two years after RBI finalizes these guidelines, giving banks time to adjust.
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