Reserve Bank of India (RBI) has taken a hardline approach to the country’s largest private bank ICICI’s investments in ICICI Venture — the country’ biggest private equity fund. The regulator feels that ICICI may be using its venture capital arm to make investments which could have been difficult from the bank’s books.
ICICI Venture is a subsidiary of ICICI Bank. Besides owning I-Venture, the bank also invests in some of the funds managed by the VC. Just as in mutual funds, a string of financial investors subscribe to such funds where the bank also joins in.
RBI has told ICICI Bank to include its investments in the VC in fulfilling the exposure limits that the bank has to stick to. Under prudential norms, the maximum exposure a bank can take to a company or a business group is linked to its capital. Earlier, banks used to float non-banking finance companies (NBFCs) to sidestep this regulation and lend to corporates.
Read more in The Economic Times article.
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