Home / Industry / Banking /  RBI rejects Muthoot Finance's proposal to buy IDBI MF

MUMBAI : The Reserve Bank of India (RBI) has not cleared a proposal by Muthoot Finance Ltd to buy IDBI Asset Management Ltd and IDBI MF Trustee Company Ltd from by IDBI Bank Ltd and IDBI Capital Markets & Securities Ltd, the non-bank financier said on Tuesday.

The central bank has conveyed to Muthoot Finance that “the activity of sponsoring a mutual fund or owning an asset management company is not in consonance with the activity of an operating NBFC".

“Consequently, we have informed Securities and Exchange Board of India (Sebi) vide our letter dated 23 November 2020 that Muthoot Finance Ltd is unable to proceed with the proposed transaction," it said in a regulatory filing.

As on 31 March 2020, IDBI Bank owned 66.67% stake in IDBI Asset Management with IDBI Capital Markets and Securities holding a 33.33% stake.

IDBI Asset Management, also referred to as IDBI Mutual Fund, managed 22 schemes during FY20, comprising 12 equity fund schemes, six debt fund schemes, two hybrid fund schemes and one each Gold Fund of Funds and Gold Exchange Traded Funds scheme.

Meanwhile, in January 2019, LIC had completed the purchase of a 51% stake in IDBI Bank, after it was approved by the Union cabinet in August 2018.

While the pandemic has hurt loan growth at most financial institutions, gold loan NBFCs have seen a surge in demand. A Crisil report on 28 October pointed out that with the covid-19 pandemic-driven lockdowns being lifted slowly and economic activity clawing back, demand for gold loans would rise, especially from individuals meeting urgent personal requirements and from micro enterprises for working capital to restart businesses.

Krishnan Sitaraman, senior director, Crisil Ratings had said that unlike other asset classes, gold loan has not faced major issues in collection and disbursement, or re-pledge of loans, barring in the stringent lockdown phase in April and May.

ABOUT THE AUTHOR

Shayan Ghosh

Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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