With HDFC blaming the lack of regulatory arbitrage for its move to merge with HDFC Bank, Reserve Bank Governor Shaktikanta Das on Friday made it clear that large non-banks can either comply with changing regulations or restructure themselves.
The change in rules, which has resulted in greater harmonisation on how the central bank looks at large non-bank finance companies like HDFC and scheduled commercial banks, has been done to keep the regulations in sync with the changing times, Das added.
Earlier this week, HDFC chairman Deepak Parekh blamed the harmonisation for the narrowing regulatory arbitrage to operate a separate entity like his and cited it as a major reason for the proposed USD 40 billion merger with HDFC Bank.
"Given the scale-based regulation for NBFCs which we have now introduced and given our current status with regard to the bank licensing policy, it is for large NBFCs to take their own commercial decisions about their future," Das said, replying to a question on the way ahead for large NBFCs.
Such large entities can either continue in the same fashion as they have been in the past by complying with the regulations, or may want to go for some kind of restructuring, Das said.
Das also said RBI is at present examining a communication from HDFC Bank for merging HDFC with itself but did not share any further details.
When asked about RBI's way of looking at a hypothetical situation where a large NBFC-backed by a corporate house wants to merge with an existing universal bank, Das said the central bank's policy is very clear at present.
At present, the central bank does not allow large industrial houses to act as promoter of a bank because of concerns surrounding potential conflicts of interest and the safety of depositor money.