RBI Asks Ujjivan, Equitas To List Small Finance Banks Separately

The Reserve Bank of India clarified that promoters of small finance banks must list their banking units separately within three years of operation in line with the regulator’s licensing requirements.

The RBI’s clarification was disclosed by Ujjivan Financial Services Ltd. and Equitas Holdings Ltd. in separate statements to the stock exchanges. Both groups have listed the holding companies, which run the small finance banks.

In the case of Equitas Holdings, the RBI clarification would mean that the small finance bank would need to be listed by Sept. 4, 2019 — three years from commencing operations. The RBI reiterated that the promoter shareholding in the bank would need to be at a minimum of 40 percent for a period of five years.

Equitas was hoping to meet the listing requirements by merging the bank into the holding company. In a disclosure in its listing document, the company had said: “Although we currently envisage a merger of the proposed SFB (small finance bank) with our company to comply with such requirement, if we are unable to merge the proposed SFB with our company, we will be forced to list the proposed SFB separately which may result in an adverse effect on the price of our equity shares.”

The company is considering its options post RBI’s directive. “There are two routes available—through an IPO, and a reconstruction arrangement in the company,” PN Vasudevan, managing director and chief executive officer of Equitas Small Finance Bank, told BloombergQuint. “We will consider both the routes to see which is appropriate in our case.”

For Ujjivan, the small finance bank would need to be listed by Jan. 30, 2020, the company disclosed to stock exchanges.

“We are working with our advisers to make that happen in the prescribed time frame,” said Uttira Davis, managing director and chief executive officer of Ujjivan Financial Services. “One of the options we have considered is to give 60 percent of the bank’s shares to the existing shareholders.”

Once the listing is completed, the company may approach the RBI to consider its merger with the bank, said its statement. It has enough time to work out options, said Samit Ghosh, founder and CEO of Ujjivan. The company, Ghosh said, had accounted for the possibility that the regulator may seek separate listing of the bank. This is not a huge surprise, he said.

Both companies had approached the banking regulator to extend the time period.