RBI eases rules by dropping proposed biz overlap curb on banks, group entities

HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank stand to gain

- SUBRATA PANDA

The Reserve Bank of India on Wednesday said it had dropped the proposed restriction on overlaps in business activities between banks and their group entities from the final guidelines on “Forms of Business and Prudential Regulation for Investments”.

The draft guidelines issued last year had suggested barring such overlaps. This removes a major overhang on some of the largest banks in the country, including HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank, which have non-banking financial companies (NBFCs) doing overlapping businesses.

“Removal of regulations that restricted banks and NBFCs from doing overlapping business is positive for all banks like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank, which have NBFCs doing overlapping businesses,” said Suresh Ganapathy, managing director, head of financial services research, Macquarie Capital.

Following the announcement, HDFC Bank's shares closed 1.48 per cent higher, Axis Bank gained 2.43 per cent, ICICI Bank rose 1.77 percent, and Kotak Mahindra Bank advanced 3.45 percent.