IBA favours creating bank holding cos

IBA favours creating bank holding cos

Mumbai: The Indian Banks’ Association (IBA), the representative body of banks, says the creation of holding companies, which are necessary for banks to fund growing demand for banking services in India, is a necessity.

IBA will present a paper to the Reserve Bank of India (RBI) on 14 September based on the feedback received from bankers on the creation of the structure of a holding company to raise capital.

The member banks of IBA— State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, ICICI Bank Ltd, Housing Development Finance Corporation Ltd (HDFC) and HDFC Bank Ltd met in Mumbai on Friday and discussed the implications of creating a holding company for banks and how the risks could be mitigated in such structures.

On 27 August, RBI had posted a discussion paper and pointed out the risks involved in creation of holding company structure for banks.

This industry experts believe, could put a spanner in the plans of the top commercial banks in India such as ICICI Bank and Sate Bank of India, which had recently proposed to transfer their insurance and asset management businesses to a holding company.

ICICI Bank’s proposal suggested that the holding company could be listed or its minority stake diluted, to garner capital to fund insurance ventures, which need capital to fuel growth.