30-Nov-2023
2 mins read
In a significant move on November 29, the Reserve Bank of India (RBI) granted approval to SBI Mutual Fund (SBI MF) for the acquisition of up to 9.99% of the paid-up share capital or voting rights in the private sector banking institution, Karur Vysya Bank Ltd. This development was accompanied by a surge in Karur Vysya Bank Ltd’s shares, which closed at Rs 153.25, marking an increase of Rs 1.95 or 1.29% on the BSE.
Rigorous Compliance Conditions Set by RBI
Despite the approval, the RBI laid down stringent conditions to ensure regulatory compliance by SBI MF in this acquisition. The conditions mandated adherence to various regulations and acts, including the Banking Regulation Act of 1949, RBI’s Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies issued on January 16, 2023, and the Foreign Exchange Management Act of 1999.
Additionally, the SEBI regulations and any other applicable guidelines, regulations, and statutes were highlighted as necessary guidelines for compliance. Karur Vysya Bank outlined these conditions in a regulatory filing.
Time-Bound Acquisition and Holding Limitations
One of the pivotal conditions stipulates that SBI MF must acquire a major shareholding within one year from the date of receiving the RBI’s letter. Failure to meet this deadline would lead to the cancellation of the approval granted by the RBI.
Furthermore, SBI MF is obligated to ensure that its aggregate holding in Karur Vysya Bank does not surpass 10% of the paid-up share capital or voting rights at any given time. Additionally, if this aggregate holding falls below 5%, SBI MF would require prior approval from the RBI to increase it to 5% or beyond of voting rights or the paid-up share capital of Karur Vysya Bank.
Summary
The RBI’s approval for SBI Mutual Fund to acquire a substantial stake in Karur Vysya Bank comes with stringent yet crucial conditions aimed at regulatory compliance. These conditions not only mandate adherence to various banking and financial acts but also set specific limitations on the acquisition and holding of shares, ensuring prudence and compliance with established regulations.