Reserve Bank of India (RBI) issues final guidelines averting restructuring for 12 bank groups

Key facts

• The Reserve Bank of India (RBI) final guidelines allow banks and their group entities to continue overlapping lending activities, preventing restructuring for 12 large bank groups.
• The draft guidelines would have impacted 12 bank groups, accounting for ~55% of sectoral advances, and 2-6% of consolidated advances of individual banks.
• The final framework permits overlapping lending operations subject to board approval.
• Of the 26 bank group entities with lending operations, only two currently qualify as upper-layer Non-Banking Financial Companies (NBFCs).
• The remaining bank group entities must adopt upper-layer norms (excluding listing requirements) by March 31, 2028.
• The guidelines impose a 20% ceiling on a bank group’s shareholding in an Asset Reconstruction Company (ARC).
• There are currently 13 ARCs in which one or more banks hold stakes.
• In all but two of these ARCs, shareholding by any single bank is less than 20%.
• Banks with shareholding exceeding the 20% limit in ARCs will have to partially divest by March 2028.