Financial conglomerates are blurring the lines between banking, insurance and capital markets. Discuss the regulatory challenges this creates in India.

A financial conglomerate (FC) works in two or more of banking, insurance and securities. India regulates each sector separately: RBI, IRDAI, SEBI and PFRDA each oversee their own part, and the FSDC monitors "large financial conglomerates" [1]. Integrated groups have outgrown this design, which leaves gaps in supervision.

How the lines are blurring

• Mergers: the HDFC Ltd–HDFC Bank merger (July 2023) needed approvals from RBI, SEBI, PFRDA and CCI [2].
• Cross-sector leadership: HDFC Bank's new MD & CEO, Anup Bagchi, was approved by RBI. He comes from ICICI Prudential Life and has experience across banking, capital markets and insurance [3].
• Bancassurance: the same bank branches that take deposits also sell insurance and mutual funds.

Regulatory challenges

• Siloed supervision: each regulator sees only its own entity. As a result, intra-group exposures and capital counted twice within a group can fall between regulators. The Inter-Regulatory Forum (2012) uses a "lead regulator" model and works through MoUs rather than a law [1].
• Systemic risk: SBI, HDFC Bank and ICICI Bank are D-SIBs that must hold extra CET1 capital [4]. Even so, stress in a group's insurance or broking arm can reach the parent bank through damage to its reputation or funding.
• Mis-selling and conflicts of interest: IRDAI flagged banks that forced insurance on loan customers, made locker access conditional on buying a policy, and sold single-premium policies as alternatives to FDs [5].
• Governance blind spots: after HDFC Bank's part-time chairman left in March 2026, RBI approved a transition arrangement. It said there were "no material concerns" on record [6]. This suggests regulators often learn about boardroom disputes only after they become public.
• Regulatory arbitrage: a group can sell a product through whichever arm is most lightly regulated. The SEBI–IRDA dispute over ULIPs (2010) showed this.

Way forward

• A statutory FC framework with group-wide capital rules, a lead regulator and shared data.
• A stronger FSDC secretariat that runs joint stress tests.
• Separate Chairperson and MD/CEO roles, as the Kotak Committee recommended [7], and require disclosure when independent directors resign.
• The same rules against mis-selling for every sales channel.

Financial conglomerates make cross-selling cheaper and reach more customers, but they also concentrate risk. Group-wide supervision combined with conduct rules that protect consumers can keep the benefits of integration while protecting stability. This fits the FSDC's mandate and SDG 8.10 on strong domestic financial institutions.