It seems that the government has approved the plan of the State Bank of India to build one financial holding company. With the aid of this holding company SBI will be able to raise capital which in turn can be spend for growing secondary businesses.

The model company can help the State Bank of India to invest money in other business areas like reinsurance, private equity, credit enhancement and mezzanine financing. The bank moreover can invest in its business, related to insurance.

Secretary of department of financial service of the finance ministry, Mr. R Gopalan stated that the government will take a decision only after the release of the discussion paper on holding companies by the Reserve Bank of India.

He added saying that the government has the largest stake in SBI which amounts to fifty nine decimal four percent.

According to another official aware of this matter, both RBI and the finance ministry are not against setting up a financial holding company but the details have to be chalked out.

RBI, pointed out in a discussion paper released on the subject in 2007 that it would like to set up a financial holding company model rather than an intermediate holding company model which is less transparent and not easy to regulate. At that time the RBI didn't approve ICICI and the SBI to set up intermediate holding companies.

According to G Ramachandran, head of the global research group of ICICI bank the biggest problem that banks face is to invest money in their secondary businesses. He said that it is very difficult for the banks to convince their shareholders who want immediate return on the capital.

Secondary businesses like insurance do not give dividend in the first few years.