The decision comes after RBI allowed SFBs to apply for amalgamation on completion of five years in business
In April, the Association of Small Finance Banks of India had urged RBI to grant in-principal approval SFBs for reverse merger with their holding companies
Mumbai: Ujjivan Small Finance Bank (SFB) on Saturday said it would initiate steps for the amalgamation of the holding company Ujjivan Financial Services Ltd with the bank.
The decision to merge the holding company with itself comes after the Reserve Bank of India (RBI) allowed small finance banks to apply for amalgamation on completion of five years from the date of commencement of business.
“We are pleased to inform you that RBI vide its letter dated July 09, 2021 has informed the said Association (of Small Finance banks of India) that it has decided to permit small finance banks and respective holding companies to apply for the amalgamation of holding company with small finance bank, in terms of provisions of Master Direction on Amalgamation of Private Sector Banks, Directions, 2016 dated April 21, 2016, 3 (Three) months prior to completing five years from the date of commencement of business of small finance bank," said the bank in its notice to the exchanges.
In April this year, the Association of Small Finance Banks of India had made a representation to RBI to grant in-principal approval to small finance banks for reverse merger with their respective holding companies.
“RBI will examine the request on merit, from the angle of regulatory/supervisory comfort and will convey No-Objection for such amalgamation based on satisfactory outcome of a due diligence exercise and following the procedure of the above mentioned Master Direction," it added.
Ujjivan SFB is required to dilute its promoter’s shareholding to 40% within a period of five years of commencement of business. As on 31 March 2021, UFSL holds 83.32% of total equity share capital of the bank and it needs to bring down the stake by 31 January 2022.
Earlier this week, Equitas SFB had also announced that it is looking to seek RBI’s approval for merger of Equitas Holding Ltd with itself.