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Chinese Wall: Bank promoters may have to separate old biz

Mahua Venkatesh, Hindustan Times  New Delhi, January 07, 2013
First Published: 21:29 IST(7/1/2013) | Last Updated: 21:39 IST(7/1/2013)

Corporate entities including Anil Ambani-led Reliance Group, the Tatas and Aditya Birla group, which have shown interest in entering the banking sector, may have to completely alienate their banking businesses from their mother entities, according to Reserve Bank of India’s (RBI’s) guidelines. The guidelines are likely to come out in the next few weeks.


“The RBI is looking at all angles to ensure that corporates who enter the banking sector handle the business in a manner that protects the interest of all those who bank with them,” said an official source  on the condition of anonymity.

“It could look at suggesting ways to keep their banking activities completely segregated from their core businesses.”

The finance ministry is also likely to send its views on the same to the RBI in the next couple of weeks.

The RBI had earlier said it would issue new licenses only after Parliament approved the Banking Laws Amendment Bill, which gives the central bank larger regulatory powers over banks.

The draft guidelines issued earlier underlined the need for new banks to open at least 25% of their branches in unbanked rural areas.

While the government is keen on allowing new banks to come up in the country, which is expected to help banking activities and improve penetration, industry sources said the banking contour may not immediately change as any new banks may take time to establish themselves before making any significant impact.

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