The Reserve Bank of India (RBI) has declined by Muthoot Finance Ltd’s proposal to buy IDBI Asset Management Ltd and IDBI MF Trustee Company Ltd from IDBI Bank Ltd and IDBI Capital Markets & Securities Ltd. 

About IDBI bank

Industrial Development Bank of India (IDBI Bank Limited or IDBI Bank or IDBI) was established in 1964 by an Act to provide credit and other financial facilities for the development of the fledgling Indian industry.

Many national institutes finds their roots in IDBI like SIDBI, India Exim Bank, National Stock Exchange of India and National Securities Depository Limited.

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 Mutual Fund managed 22 schemes during FY20.

About Deal

Muthoot Finance Limited (MFIN), a Kerala-based gold loan NBFC, had signed a share purchase agreement to  acquire IDBI  Asset Management Limited and IDBI MF Trustee Company Limited in November 2019, for a consideration of around Rs 215 crore.

Through this acquisition MFIN was planning to enter the Mutual Fund Asset Management space. 

Why rejected

Muthoot Finance Limited’s request for a no objection certificate was not acceded to by the Reserve Bank of India on the ground 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.

BSE filing

“We wish to inform you that a share purchase agreement dated November 22, 2019, was entered into by and between Muthoot Finance Limited, IDBI Bank Limited, IDBI Capital Markets & Securities Limited, IDBI Asset Management Limited and IDBI MF Trustee Company Limited (“Share Purchase Agreement”) in relation to the proposal for acquisition by Muthoot Finance Limited of 100% equity shares of IDBI Asset Management Limited held by IDBI Bank Limited and its nominees and IDBI Capital Markets & Securities Limited, and 100% equity shares of IDBI MF Trustee Company Limited held by IDBI Bank Limited and its nominees subject to receipt of necessary regulatory approvals from Securities and Exchange Board of India (“SEBI”) and other relevant regulators.”

“We would like to inform that Muthoot Finance Limited’s request for a no-objection certificate was not acceded to by the Reserve Bank of India on the ground 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 SEBI vide our letter dated November 23, 2020, that Muthoot Finance Limited is unable to proceed with the proposed transaction.”

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