RBI Rejects ESAF Small Finance Bank Share Plan, Promoter Holding Reduction Delayed

The Reserve Bank of India (RBI) has informed ESAF Small Finance Bank that it has rejected a scheme of arrangement that would have allowed Dia Vikas Capital Private Limited to acquire shares, leading to a holding exceeding 12% in the bank. The RBI specifically stated that acquisition of shares by Dia Vikas Capital in excess of 5% of the paid-up share capital cannot be accepted. The original intent of this scheme was to reduce the promoter shareholding in ESAF Small Finance Bank. ESAF Financial Holdings, the promoter entity with 52.92% ownership, is now tasked with developing an alternative plan to comply with the RBI's Bank Ownership Directions 2023. Pending the finalization of a new approach, the current scheme will not be filed with the National Company Law Tribunal. The scheme had previously been approved by the board of ESAF Financial Holdings on December 20, 2024, which aimed to bring total promoter holding down to 44.42% from the then 58.98%.

Impact This regulatory rejection significantly delays ESAF Small Finance Bank's plan to reduce promoter shareholding, requiring the promoter group to re-strategize to meet RBI's stringent ownership guidelines. It may impact the bank's capital structure evolution and its adherence to compliance timelines. Impact Rating: 5/10

Difficult Terms: Reserve Bank of India (RBI): India's central bank, responsible for regulating the country's banking and financial system. Scheme of Arrangement: A court-approved plan by a company to reorganize its structure, often involving mergers, acquisitions, capital reduction, or share consolidation. Promoter Shareholding: The percentage of shares held by the founders or original promoters of a company. Paid-up Share Capital: The total amount of money shareholders have paid to the company for their shares. National Company Law Tribunal (NCLT): A quasi-judicial body in India that adjudicates matters relating to companies. Bank Ownership Directions 2023: Regulations issued by the RBI setting limits and guidelines for ownership and control of banks in India.