Equitas Holdings Ltd (EHL) and Equitas Small Finance Bank Ltd (ESFBL) on Friday received no-objection from the Reserve Bank of India (RBI) on the voluntary amalgamation of both units, the bank said.

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The RBI 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 percent within five years of commencement of operations by the SFB (Small Finance Bank).

However, RBI said the EHL must divest its shareholding in its subsidiary Equitas Technologies P Ltd prior to the amalgamation. 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.

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"Any investor that will be acquiring or holding five percent or more shareholding in ESFBL upon the scheme taking effect shall seek prior approval of RBI under applicable RBI regulations within one month from the date of the letter. Till they are found by RBI to be “fit and proper”, their voting rights in ESFBL will be restricted to below five percent of total voting rights of shareholders of ESFBL," the lender said.

Further, the scheme has to be approved by requisite majority of shareholders and creditors of EHL and ESFBL as per applicable procedure and the documents in connection with shareholder meetings will have to be submitted to the RBI as required under applicable RBI regulations.

ESFBL will also ensure compliance with applicable provisions of Banking Regulation Act, 1949, RBI Act, 1934, FEMA Regulations, FDI Policy, Prevention of Money Laundering Act, 2002, and other applicable laws/ regulations including RBI circular/ directions on the issue of shares by private sector banks and amalgamation of private sector banks.

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The audited balance sheet of ESFBL as on the effective date of the scheme will have to be submitted to the RBI within two months from the date after ensuring compliance with prescribed accounting policies and standards. For cancellation and surrender of the certificate of registration, EHL will have to approach the RBI within three days of effective date of the scheme and other applicable requirements under regulations/ guidelines issued in this regard.

"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 a 74.59 percent stake in ESFBL at end of March 2022.

As per the SFB licensing guidelines of RBI, a promoter of SFB can exit or to cease to be a promoter after the mandatory initial lock-in period of five years (initial promoter lock-in) depending on RBI's regulatory and supervisory comfort and SEBI regulations at that time.

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

First Published:May 6, 2022 9:17 PM IST