The Reserve Bank of India (RBI) has removed the proposed bar on the overlap in the businesses undertaken by a bank and its group entities, discarding a major obstacle for big banks that own shadow lenders operating in similar lines of business.

“The proposed regulatory restriction on overlap in the businesses undertaken by a bank and its group entity(ies) is being removed from the final guidelines. The strategic allocation of business streams among group entities will be left to the wisdom of bank boards,” the RBI said.

The banking regulator had issued a draft circular in October, proposing restriction on overlap in lending activities undertaken by the bank and its group entities. It said a single entity within a bank group should undertake a particular form of permissible business.

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