India central bank asks banks to ringfence non-core business

MUMBAI: India’s central bank on Friday asked banks to submit a detailed plan on ringfencing their core business from other riskier non-core business by March 2026.

The Reserve Bank of India said banks can have multiple entities in the lending business, but with approval of the bank’s board. Lenders have been asked to get board approval and implement the new rules by March 31, 2028.

This is a reversal from initial guidelines, which were released in October last year and mandated that only a single entity within a bank group could undertake the same kind of business.

The change comes as a relief for banks, especially private ones, which would have needed to spin off their lending subsidiaries. HDFC Bank and Axis Bank are among lenders that have separate lending units.

India central bank to tolerate weaker Indian rupee as inflows dry up, sources say

The RBI said on Friday that banks will require a so-called no objection certificate for their overseas branches to undertake businesses the parent is not allowed to operate.

Separately, the central bank relaxed rules for non-financial holding companies to conduct businesses like mutual fund, insurance, pension fund management, investment advisory and broking. The entities can intimate the RBI within 15 days following the board decision against the previous requirement for prior approval.