The Reserve Bank of India is said to be reviewing small financeNSE -0.63 % banks’ capital and holding structure and may come up with a pari-passu arrangement for all lenders. 

The review of the norms may immediately benefit Equitas Small Finance Bank and Ujjivan Small Finance Bank, which are desperately trying to abide by the listing rule by way of share-transfer schemes. 


The RBI, under previous governor Urjit Patel, had directed these lenders to get listed within the deadline as specified in their bank licensing agreements, closing down all other options such as reverse merger of banks and their holding companies. 


However, current RBI governor Shaktikanta Das is more open to communication and has told some of these lenders to put in writing the issues they are facing, moving away from the regulator’s previous rigid stance. 


"RBI told us to submit a paper on capital and holding structure. We are waiting for its response," Ujjivan Small Finance Bank Managing Director Samit Ghosh told ET. 


Equitas Holdings, which is listed and is the holding company for Equitas Small Finance Bank, has already sought permission to offer 47% of its ownership in the bank to its existing shareholders for no cash consideration. This will dilute the holding company’s stake in the bank to 53%. The bank will then list the shares on the stock exchanges using a provision that allows companies to get listed without making an initial public offer of shares. The deadline for this exercise is September 4. 


The promoter will then have to bring down the stake to 40% by September 4, 2021. 


Equitas Small Finance Bank managing director PN Vasudevan refused to comment on the issue. 


An email query to RBI on the issue remained unanswered till as of press time. 


Experts said that such arrangements may dilute the shareholders’ value. 


Ujjivan will have to get its bank listed by January 2020. Its promoter and holding company, Ujjivan Financial Services, will have to dilute their holding to 40% by January 2022. 


Ujjivan was earlier contemplating issuing of bonus shares of the bank in favour of the investors of the holding firm, but this proved to be expensive. 


“There is also lack of clarity on what would happen with the minimum promoter holding after the five-year term. RBI needs to address this issue as well,” a CEO of a bank said. 


The holding company rule is also not uniform for all lenders. Seven of the 10 small finance banks followed the holding company structure with AU Small Finance Bank, Capital Small Finance Bank and Suryoday Small Finance Bank being the exceptions. 


Published On : 21-05-2019


Source : Economic Times

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