Reciprocal Cross Holdings

A clause in the Reserve Bank of India’s Master Circular on Basel-III Capital Regulations relating to ‘Reciprocal Cross-Holdings in the Capital of Banking, Financial, and Insurance Entities’ may prevent banks from going all out to invest in LIC’s Initial Public Offering (IPO).

  • According to the Circular, banks are required to apply a “corresponding deduction approach” to reciprocal cross-holdings in the capital of other banks, financial institutions, and insurance entities.

About Reciprocal Cross Holdings

  • It is a situation where one publicly-traded company holds a significant number of shares of another publicly-traded company.
  • The shares owned of the second publicly-traded company are referred ....
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