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Shares of Equitas Small Finance Bank and Ujjivan Small Finance Bank surged on BSE on Monday after the Reserve Bank of India permitted the SFBs and respective holding companies to apply for the scheme of amalgamation.
The scrip of Equitas SFB closed 7.3 per cent higher at ₹69.85 apiece on BSE on Monday. Similarly, Ujjivan SFB shares ended at a gain of 1.48 per cent at ₹30.95 apiece on BSE.
In a stock exchange filing on July 10, Equitas SFB had said it would be initiating steps to finalise the Scheme of Amalgamation, submit it to the Boards of the Bank and EHL for approval and take further action.
“RBI vide its communication dated July 9, 2021 has permitted the bank to apply to RBI, seeking approval for Scheme of Amalgamation. RBI has also conveyed that any ‘no-objection’, if and when given on the Scheme of Amalgamation, would be without prejudice to the powers of RBI to initiate action, if any, for violation of any licensing guidelines or any terms and conditions of license, or any other applicable instruction,” Equitas SFB had said.
Similarly, Ujjivan SFB also had said it would be initiating necessary steps for the amalgamation of Ujjivan Financial Services with the bank according to applicable laws and guidelines.
“RBI vide its letter dated July 9, 2021 has informed the said Association that it has decided to permit small finance banks and respective holding companies to apply for the amalgamation of holding company with small finance banks...three months prior to completing five years from the date of commencement of business of small finance bank,” it had said in a stock exchange filing.
Under RBI guidelines, a promoter of an SFB can exit or cease to be a promoter after the mandatory initial lock-in period of five years, depending on the RBI’s regulatory and supervisory comfort and SEBI Regulations in this regard at that time.
In the case of Equitas SFB, the initial promoter lock-in expires on September 4, 2021.
“...the bank had requested RBI if a Scheme of Amalgamation of the promoter and holding company, Equitas Holdings Limited, with the bank, resulting in exit of the promoter, could be submitted to RBI for approval, prior to the expiry of the said five years, to take effect after the initial promoter lock-in expires,” it said.
According to Ujjivan SFB, the Association of Small Finance Banks of India had in April made a representation to RBI on Dilution of Promoter Shareholding requesting it to grant prior in-principle approval to SFBs for a reverse merger with their respective Holding Companies on completion of initial five years from the date of commencement of business.
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