An `RBI Discussion Paper on Holding Companies in Banking Groups' has brought questions about the structure of financial firms to prominence.
I think that competition policy is a core principle, and that government should not prevent a firm that makes trucks from embarking upon making cars. In my opinion, achieving efficient and world-class financial firms critically requires breaking down the walls that have been artificially created within Indian finance. Such efforts in financial sector reforms would help achieve multi-product firms where competition, innovation and efficiency considerations determine what a financial firm does. For the forseeable future, in India, we're going to have atleast four financial regulators covering banking, securities, insurance and pensions. The clean holding company structure involves an unregulated mother company - which might typically be listed - which works as a corporate headquarters which has four subsidiaries. Each subsidiary might deal with one regulator, and each subsidiary would operate like a division of a multiproduct firm.
Government agencies might point out that, given their present organisation, this configuration makes life difficult for the regulator. However, it is only fair to propose that government must be restructured to fit the needs of an efficient and competitive industry, and not the other way around.
On this subject, I would like to point you to Section 2.1, titled `The holding company structure' in Chatper 11 `Reforming financial regime governance' of the MIFC report.