Equitas Small Finance Bank and the parent Equitas Holdings Ltd. said on Friday that the Reserve Bank of India had conveyed its no-objection to their proposal of amalgamation, subject to conditions.
“We would like to inform that RBI in its letter dated May 6, 2022 has conveyed its no-objection to our proposal for voluntary amalgamation of EHL (Equitas Holdings Ltd.) with ESFB (Equitas Small Finance Bank),” they said in their stock exchange filings.
The RBI’s no-objection comes with conditions.
The merger is being effected to comply with the RBI norms on small finance banks, mandating the promoter to reduce the stake in the subsidiary to 40% within five years of commencement of operations by the SFB (Small Finance Bank).
According to the RBI’s conditions laid down for SFBs in June 2016 and the guidelines for licensing of SFBs in private sector in November 2014, equity shares of SFBs should be listed on recognised stock exchange(s) within three years from the date the net worth of SFB reaches ₹500 crore.
In the case of ESFB, the applicable date for listing was September 4, 2019. However, it commenced its banking operations with a net worth of more than ₹500 crore.
Compliance with regard to listing was honoured through an Initial Public Offering (IPO) and listing of shares of ESFB on exchanges from November 2, 2020.
The other condition requires that if a promoter holds more than 40% stake in the subsidiary, it should be brought down to 40% within five years from the date of commencement of banking operations. Here, the applicable date is September 4, 2021.
The conditions laid down by the RBI on no-objection for the purpose of amalgamation include divestment of shareholding by EHL in its subsidiary – Equitas Technologies – prior to the scheme taking effect.
Besides, Equitas SFB will have to seek RBI approval for bringing Equitas Development Initiatives Trust (EDIT) and Equitas Healthcare Foundation (EHF) under its ambit prior to the scheme taking effect.
“RBI has also indicated that the no-objection shall not be treated as granting exemption from any of the regulatory requirements of RBI, and any deviation from the existing regulatory instructions would have to be sought separately and that RBI may impose additional conditions that it deems appropriate,” they said in their respective stock exchange filing.
EHL held 74.59% stake in ESFBL at the end of March 2022.
Shares of Equitas Holdings closed at ₹107.30 apiece on BSE, down by 1.69% from previous close. Equitas SFB scrip ended 0.93% higher at ₹54.40 apiece.