It suggests that the central bank is looking for uniformity in ownership rules.
The Reserve Bank of India (RBI) wants banks to limit ownership stakes in capital intensive insurance companies at a maximum 20%, less than half of what the current regulations permit, reports Reuters.
Central bank rules allow banks to hold up to 50% stakes in insurers and on a selective basis equity holdings can be higher but must eventually be brought down within a certain period.
However, sources said that RBI in 2019 unofficially advised banks seeking to acquire stakes in insurers, to limit such stakes to a maximum of 30%, and more recently directed them to cap stake purchases in insurers at 20%.
The unofficial push suggests the RBI is looking for uniformity around ownership rules for lenders with exposure in the sector, following suggestions made in a working paper by an internal group released in November 2020.
Some lenders such as Kotak Mahindra Bank and State Bank of India have wholly-owned or majority owned insurance subsidiaries, and the paper had suggested that if any lender had more than a 20% stake in an insurer, they should follow a non-operative financial holding company structure which will ring fence ownership.
Here’s more from Reuters.
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