RBI approved the merger of Equitas Holdings and Equitas SFB

The Reserve Bank of India has given its nod to Equitas Small Finance Bank and its parent company Equitas Holdings Ltd’s merger plan, subject to certain restrictions. The RBI’s no objection comes with strings attached. The merger is being carried out to comply with RBI small finance bank regulations, which require the promoter to cut his or her stake in the subsidiary to 40% within five years of the SFB’s start-up (Small Finance Bank).

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Key Points:

• Equity shares of SFBs should be listed on recognised stock exchange(s) within three years of the date the SFB’s net worth reaches Rs 500 crore, according to RBI requirements laid down for SFBs in June 2016 and guidelines for licensing SFBs in the private sector in November 2014.
• The applicable date for listing in the case of ESFB was September 4, 2019. It began banking activities, however, with a net worth of more than Rs 500 crore.
• Compliance with the listing requirements was met by an IPO and the trading of ESFB shares on exchanges beginning November 2, 2020.
• The third criteria is that if a promoter owns more than 40% of a subsidiary, it must be brought into the fold.
• The other criteria is that if a promoter owns more than 40% of the subsidiary, he or she must reduce his or her ownership to 40% within five years after the start of banking operations. The day in question is September 4, 2021.
• The RBI’s conditions for granting a no-objection letter for the purpose of merger include EHL’s disposal of its stake in its subsidiary, Equitas Technologies, prior to the scheme’s implementation.
• In addition, before the programme takes effect, Equitas SFB will have to get RBI approval to bring Equitas Development Initiatives Trust (EDIT) and Equitas Healthcare Foundation (EHF) under its umbrella.
• At the end of March 2022, EHL owned 74.59 percent of ESFBL.

Equitas Holdings’ stock finished at Rs 107.30 per share on the BSE, down 1.69 percent from the previous close. The Equitas SFB stock finished 0.93 percent higher at Rs 54.40 per share.

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