RBI grants no objection to the merger of Equitas SFB and Equitas Holdings

RBI grants no objection to the merger of Equitas SFB and Equitas Holdings

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.

Equitas Small Finance Bank and the parent Equitas Holdings Ltd on Friday said that the Reserve Bank of India has given its no-objection with their proposition of amalgamation, liable to conditions. The RBI no-objection comes with conditions. The consolidation is being affected to follow the RBI norms on small finance banks, ordering the promoter to diminish the stake in the auxiliary to 40 percent in the span of five years of beginning of operations by the SFB (Small Finance Bank).

According to RBI conditions laid down for SFBs in June 2016 and 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 Rs 500 crore.

In 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 Rs 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 per cent stake in the subsidiary, it should be brought down to 40 per cent 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 per cent stake in ESFBL at end of March 2022.

Stock of Equitas Holdings closed at Rs 107.30 apiece on BSE, down by 1.69 per cent from previous close. Equitas SFB scrip ended 0.93 per cent higher at Rs 54.40 apiece.

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