Earlier this month, ICICI Bank has received the Foreign Investment Promotion Board (FIPB)’s approval to transfer its holdings in its insurance and asset management subsidiaries to an intermediate holding company, subject to the approval of RBI.
The RBI, however, before considering the application, has issued a discussion paper raising certain issues. According to RBI creation of an intermediary financial holding company may lead to a problem of regulation. The intermediary holding company, being a non-banking finance company, is not fully regulated by RBI. Therefore, RBI said, a proper legal framework needs to be created before such structures are floated to ensure that no unregulated entities are present within the structure.
RBI has, instead, suggested a bank holding company (BHC) or a financial holding company model in which bank and non-bank subsidiaries in a banking group will be owned by the holding firm.