NEW DELHI: The Reserve Bank of India (RBI) allowed IDFC Limited to step down as promoter of IDFC First Bank at the end of the five-year blocking period, paving the way for a possible reverse merger between two entities.
“We would like to inform you that the Reserve Bank of India (RBI) has, in its letter dated July 20, 2021, clarified that after the expiration of the 5 year lockout period, IDFC Limited may exit as a promoter. of IDFC. FIRST Bank Limited, ”IDFC First Bank said in a stock exchange submission. This five-year blocking period ended on September 30, 2020.
Earlier this month, the banking regulator also allowed holding companies Equitas and Ujjivan Small Finance Banks to roll back the merger with the bank. The holding company discount for Equitas Holding is 28.5% and Ujjivan SFB 33.1%, and for IDFC it is currently 27.7%.
IDFC owns 36.56% of the bank. A formal request is expected to be submitted to RBI for its approval for a reverse merger, which analysts say could help unlock shareholder value, by removing the holding company’s handover to IDFC Ltd. shareholders. In addition, IDFC may also have to sell its IDFC AMC mutual fund business.
According to RBI rules, the participation of the non-operational financial holding company, which is the promoter of the bank, must be at least 40% of the released voting capital of the bank, which will be blocked for a period of time. period of five years from the date of commencement of activity of the bank, then reduce it to 15% over ten years.
IDFC Bank was licensed from the RBI with Bandhan Bank in 2014 in accordance with the Universal Banking Licensing Guidelines of February 2013. These guidelines mandated the IDFC to create a Non-Operational Financial Holding Structure (NOFHC) to house the bank. and other financial services units of the parent company to ensure that the banking business was completely isolated from other business activities.
Holds 36.56% in the bank
An application must be submitted to the RBI for approval for a reverse merger, which could help unlock shareholder value, by removing the holding company’s remittance to the shareholders of IDFC Ltd.