RBI has come up with a new system to monitor the financial conglomerates to elucidate the complex inter group transactions and exposures between the entities.

Internationalization of the markets and liberalization of national markets are among the host of factors that have led to the emergence of large financial conglomerates with presence in a number of businesses. These entities operate in various markets across the globe and are prone to multiple jurisdictions. A proper supervision of financial conglomerates is an issue for regulators since the problem arising from one entity may affect the other companies within the group. In the Indian context, the financial sector has undergone a radical change with all the four segments—banking, non-banking finance, securities and insurance—growing significantly, thanks to the restructuring initiatives taken up by the market intermediaries. As a result of this, financial conglomerates are becoming increasingly dominant in the country and that calls for an efficient system to monitor their businesses. Recently, Reserve Bank of India (RBI) has issued a report on the regulation of ‘financial conglomerates’.

In the Mid-term Review of Monetary and Credit Policy for the year 2003- 04, RBI has proposed greater supervision of entities by respective regulators— RBI, the Securities and Exchange Board of India (Sebi), and the Insurance Regulatory and Development Authority (IRDA). It has laid down criteria for identification of financial conglomerates. As per the recommendations of the working group on financial conglomerates, a group would be designated as a ‘Financial Conglomerate’ (FC) if any group entity comes under the jurisdiction of ‘specified regulators’ and has a significant presence in the respective financial market segment; and the group as a whole, has operations in at least one more financial market segment