The Reserve Bank of India (RBI) has rejected Muthoot Finance's proposal to acquire IDBI Asset Management Ltd and IDBI MF Trustee Company Ltd from IDBI Bank Ltd and IDBI Capital Markets & Securities Ltd. The request for a no-objection certificate was not acceded to by RBI on the ground that, "the activity of sponsoring a Mutual Fund or owning an Asset Management Company (AMC) is not in consonance with the activity of an operating NBFC", the country's largest gold financing company said in a regulatory filing.
This is a major setback for Muthoot Finance which had announced last year to foray into mutual fund asset management space by acquiring IDBI Bank's mutual fund and asset management units. It had inked deal to acquire IDBI Asset Management and IDBI MF Trustee Company for a total consideration of Rs 215 crore.
On November 22, 2019, the Kerala-based gold loan company had entered into a share purchase agreement with IDBI Bank, IDBI Capital Markets & Securities, IDBI Asset Management and IDBI MF Trustee Company for acquisition of 100 per cent equity shares of IDBI Asset Management held by IDBI Bank and its nominees and IDBI Capital Markets & Securities, and 100 stake in IDBI MF Trustee Company held by IDBI Bank and its nominees.
Last week, the RBI had imposed a penalty of Rs 10 lakh on Muthoot Finance for non-compliance with directions on maintaining loan to value ratio in gold loans and on obtaining copy of PAN card of the borrower while granting gold loans of over Rs 5 lakh. The central bank observed that the statutory inspection of the company with reference to its financial position as on March 31, 2018 and March 31, 2019, revealed non-compliance with the directions issued by it.
Ahead of the announcement, shares of Muthoot Finance ended Tuesday's trade at Rs 1,138.10, down 1.52 per cent, against previous closing price of Rs 1,155.70 on the Bombay Stock Exchange.
By Chitranjan Kumar