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Shaktikanta Das, Governor of the RBI

Mumbai: HDFC blaming lack of regulatory arbitrage for its decision to merge with HDFC Bank, Reserve Bank Governor Shaktikanta Das made it clear on Friday that large non-banks can either comply with the changing regulation, or restructure.

The change in rules, which resulted in greater harmonization of how the central bank views large non-banking financial corporations like HDFC and regular commercial banks, was done to keep the regulations in step with the changing times, Das added.

Earlier this week, HDFC Chairman Deepak Parekh accused harmonization of reducing regulatory arbitrage to operate a separate entity like his own and cited it as a key reason for the proposed merger of 40 billion dollars with HDFC Bank.

“Given the NBFC ladder-based regulation that we have now introduced and given our current situation with respect to banking licensing policy, it is up to large NBFCs to make their own business decisions regarding their future,” Das said, answering a question. on the way forward for large NBFCs.

These large entities may either continue in the same way they have been in the past by complying with regulations, or they may want to opt for some sort of restructuring, Das said.

Das also said RBI is currently considering a submission from HDFC Bank to merge HDFC with itself, but did not share further details.

Asked how RBI views a hypothetical situation where a large NBFC backed by a corporate house wants to merge with an existing universal bank, Das said central bank policy is very clear at present.

Currently, the central bank does not allow major industrial houses to act as a sponsor of a bank due to concerns about potential conflicts of interest and the safety of depositors’ money. RAM AA PTI

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