Intermediate holding company okay: FICCI

NEW DELHI: With a view to enhancing the capital base of bank subsidiaries and enabling them to enter multiple businesses such as insurance and asset management with effective risk management, industry body FICCI has suggested the creation of an intermediate holding company (IHC).

In a note to the RBI, FICCI has said that since it may not be immediately possible to constitute a financial holding company or a banking holding company due to the absence of a regulatory law such as the Gramm-Leach-Bliley (GLB) Act of the United States, it would be desirable to have IHCs.

This structure will help de-risk a bank since holding company would fund the fresh investments into insurance and asset management and other financial services by raising its own funds rather than depending on Bank’s capital. FICCI has proposed that RBI may consider a minimum net worth requirement for parent.