RBI bars Equitas Small Finance Bank from opening new branches, caps CEO pay

RBI bars Equitas Small Finance Bank from opening new branches, caps CEO pay

The Reserve Bank of India has barred Equitas Small Finance Bank from opening new branches after it missed the deadline to list its shares on stock exchanges, a key licensing condition.

The RBI also froze the salary of Equitas SFB’s managing director and CEO, Vasudevan PN, at the existing level, parent Equitas Holdings Ltd said in a stock-exchange filing.

The central bank has warned the lender that it may impose more restrictions if it fails to make “satisfactory progress” towards listing its shares, Equitas Holdings said.

As per the RBI’s licensing conditions issued in November 2014, a small finance bank’s shares have to be mandatorily listed on the stock exchanges within three years of touching a net worth of Rs 500 crore.

For Equitas SFB, that three-year period lapsed on September 4.

Equitas Holdings had sought an extension from the RBI to list the small finance bank in June and August this year. However, the central bank rejected the request.

As per the licensing conditions, Equitas Holdings is also required to pare its stake in the small finance bank from 100% to 40% by September 2021.

In February, the holding company had proposed a scheme to provide its own shareholders  a stake in Equitas SFB directly and comply with RBI norms.The scheme comprised issuance of 892.06 million shares to all shareholders for no cash. This would mean about 2.66 Equitas SFB shares for every one share of the parent company.

Equitas Holdings is backed by International Finance Corporation, the World Bank’s private-sector investment arm, and the UK government’s development finance institution CDC Group Plc. Early-to-mid-stage venture capital firm Helion Venture Partners is also an investor in the company.

Equitas isn’t the only small finance bank that is required to go public. Ujjivan Small Finance Bank Ltd, a unit of non-bank lender Ujjivan Financial Services Ltd, last month filed its draft prospectus with the Securities and Exchange Board of India to float an initial public offering.

Ujjivan Financial launched small finance banking operations in February 2017 after transferring its business to Ujjivan SFB. The group had received in-principle approval from the RBI in October 2015 to establish a small finance bank.

India has 10 small finance banks, a new type of lenders that the RBI created five years ago as part of efforts to expand the reach of financial services. AU Small Finance Bank is the only one of those that is listed on the stock exchanges.

[“source=vccircle”]