New Delhi, Oct. 1 -- In a relief to banks, the Reserve Bank of India has withdrawn its proposal to stop entities within a bank group from undertaking similar business activities.

Now, banks and their non-bank financial companies can operate in a similar line of business without banks having to merge or divest their stakes in their subsidiary.

"The proposed regulatory restriction on overlap in the businesses undertaken by a bank and its group entities is being removed from the final guidelines," RBI governor Sanjay Malhotra said following the monetary policy committee's (MPC) meeting on Wednesday.

"The strategic allocation of business streams among group entities will be left to the wisdom of bank boards," he added.

The relaxation is e...