The National Housing Bank (NHB) in India was established as a wholly-owned subsidiary of the Reserve Bank of India (RBI). Therefore, the correct answer is Option 2: Reserve Bank of India.

The National Housing Bank was established on July 9, 1988, under the National Housing Bank Act, 1987. It was set up to promote the development and regulation of the housing finance market in India. The primary objective of NHB is to provide financial and other support for the development of housing and related infrastructure in the country.

Here`s a detailed reasoning for why Option 2 is the correct answer:

1. Role of the Reserve Bank of India (RBI): The RBI is the central banking institution of India responsible for formulating and implementing monetary policies, maintaining financial stability, and regulating the banking sector. As part of its role, the RBI oversees and supervises various financial institutions in the country, including subsidiaries like the National Housing Bank.

2. Founding and Ownership: The National Housing Bank was established as a wholly-owned subsidiary of the Reserve Bank of India. This means that the RBI has complete ownership and control over the NHB. This arrangement allows the RBI to exercise regulatory oversight and ensure that the operations of the NHB align with the broader objectives of the Indian financial system.

3. Legal Framework: The National Housing Bank Act, 1987, which provides the legal framework for the establishment and functioning of the NHB, explicitly states that it shall be a wholly-owned subsidiary of the Reserve Bank of India. This Act empowers the NHB to perform its functions and fulfill its mandate under the regulatory guidance of the RBI.

4. Regulatory Control: Being a subsidiary of the RBI, the National Housing Bank operates under the regulatory control of the central bank. The RBI sets guidelines and norms for housing finance companies, including those regulated by the NHB, to ensure their prudential functioning, financial stability, and consumer protection. The RBI also conducts inspections, issues directives, and monitors the activities of the NHB to maintain a robust and stable housing finance market.

It`s worth noting that while options like State Bank of India (SBI), ICICI Bank, and Life Insurance Corporation of India (LIC) are significant financial institutions in India, they are not the parent organization of the National Housing Bank. The NHB operates independently but remains under the ownership and regulatory oversight of the Reserve Bank of India.