Firms with financial arms under scanner

Business houses and companies that have moved into the financial sector in a big way had better beware "" big brother is watching.

An inter-regulatory committee to specially monitor financial conglomerates, set up by the Reserve Bank of India (RBI), the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory Development Authority (Irda), is understood to have identified corporates groups such as Tata, Birla and Bajaj, and non-banking finance companies such as Reliance Capital, GE Capital and Sahara as systemically important financial intermediaries, otherwise referred to as SIFI.

The idea of such a working group was conceptualised in the RBI's annual policy statement on May 8.

Banking sources close to the committee said that companies and banking and non-banking entities will come under the committee's scrutiny in the following circumstances:

If they have diversified into the insurance industry and have a business over Rs 100 crore';

If they have diversified into the mutual fund industry where their name is included in the top 70 per cent of the segment in terms of assets under management;

If they have moved into deposit taking non banking financial activity where they are in the top 70 per cent of the segment in terms of deposit base

If they have diversified into the non deposit taking NBFC business and have deposits of over Rs 2,000 crore,

If they have a presence in the primary dealer business and feature among 70 per cent of the segment in terms of total turnover;

If they have a bank which is counted among the top 70 per cent of the segment in terms of asset base.

Sources added that the list is a preliminary one and was drawn up based on the feedback received from regulators, and that more names could be added to the list in future.

Some of the banks and broking houses that qualify for the SIFI list include State Bank of India, ICICI Bank, Punjab National Bank, Bank of India, Bank of Baroda, Citibank, DSP Merrill Lynch, Life Insurance Corporation, HDFC, Standard Chartered, Corporation Bank, IDBI and Corporation Bank.

Sources said banks and financial intermediaries have been included if they have extended into related activities of banking, insurance, primary delalership etc.

Corporates which have been included will be under scrutiny to the extent of their involvement in any of the financial activities falling under the purview of either of three market regulators.

The group for the time being has decided to keep regional rural banks, depositories, special purpose vehicles, asset reconstruction companies and associates of the State Bank of India out of its purview. However the list of entities excluded will be subject to periodic review.