RBI has no objections to merger of Equitas SFB and Equitas Holdings


Equitas Small Finance Bank and parent company Equitas Holdings Ltd. said on Friday that the Reserve Bank of India had not objected to its merger proposal subject to conditions.

“We would like to inform you that in its letter dated May 6, 2022, RBI did not express any objection to our proposal for the voluntary merger of EHL (Equitas Holdings Ltd.) with ESFB (Equitas Small Finance Bank),” it reads in their stock exchange filings.

The harmlessness of the RBI is subject to conditions.

The merger is in order to comply with RBI standards for small finance banks, which require the promoter to reduce its stake in the subsidiary to 40% within five years of the SFB (Small Finance Bank) starting operations.

Under the RBI’s June 2016 Conditions for SFBs and the November 2014 Guidelines for Licensing SFBs in the Private Sector, shares of SFBs should be listed on recognized stock exchanges within three years from the date the net worth of the SFB reached ₹500 crore.

In the case of ESFB, the relevant listing date was September 4, 2019. However, it began banking with a net worth of more than 500 crore.

Listing compliance was satisfied by an initial public offering (IPO) and listing of ESFB shares on stock exchanges beginning November 2, 2020.

The other condition requires that if a founder owns more than 40% of the shares in the subsidiary, this should be reduced to 40% within five years from the date of commencement of banking operations. The decisive date here is September 4, 2021.

Among the conditions RBI has unopposed for the purpose of the merger is to dispose of EHL’s interest in its subsidiary – Equitas Technologies – prior to the Scheme becoming effective.

In addition, Equitas SFB must obtain RBI approval to bring the Equitas Development Initiatives Trust (EDIT) and the Equitas Healthcare Foundation (EHF) under its purview before the program becomes effective.

“RBI has also indicated that non-objection is not to be treated as an exemption from RBI’s regulatory requirements and any deviation from existing regulatory requirements would need to be requested separately and that RBI may impose additional conditions as it deems appropriate ‘ they said in their respective exchange filings.

At the end of March 2022, EHL held 74.59% of the shares in ESFBL.

Equitas Holdings shares on the BSE closed at ₹107.30 a share, down 1.69% from the previous close. Equita’s SFB Scrip ended up 0.93% higher at £54.40 apiece.

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