|Moody's has suggested that Reserve Bank of India's proposed guidelines for banks to limit their exposures to their group entities might affect the performance of major banking groups like State Bank of India, ICICI Bank, Bank of Barod, Kotak Mahindra Bank and Indian Bank.
RBI had last week issued a draft notice to banks to limit the banks' exposure to within their group financial and non-financial entities. The proposed rules if implemented would effect the group entities which depend on parent bank for capital support, specifically those in the field of insurance requiring large capital and liquidity.
"If the RBI adopts them, the new guidelines would be credit positive for India's banks, but credit negative for group companies that rely on parent banks for capital and brand support," read the Moody's release .
"The guidelines would lead these banks to re-examine the financial support they provide to group businesses as anything exceeding the stipulated limits would be detrimental to their standalone capital calculations and thus their business growth,"added the report.