Although the merger between Indiabulls Housing Finance and Lakshmi Vilas Bank (LVB) got the Competition Commission of India's nod in June, things haven't moved forward on bagging other regulatory approvals, including from the RBI. In an attempt to prod things along, Indiabulls founder Sameer Gehlaut is reportedly willing to cede all control in the merged entity, which will be among the top eight private banks in India by size and profitability, with a net worth of over Rs 19,000 crore.

A source in the know told The Economic Times that Gehlaut wrote to the RBI last month promising the regulator that he will have no say in the "amalgamated bank" or its policies and it will be "completely insulated from Sameer Gehlaut group", where he will continue as a promoter. He added that the promoter group would give up rights to appoint majority of directors and since he would hold no executive position, he would not be in a position to directly or indirectly influence the management and business of the new entity.

The Exchange has sought clarification from Indiabulls Housing Finance on this development on Friday and a reply is awaited. In April, the LVB board announced its merger with Indiabulls Housing Finance in a share-swap deal. As per the merger proposal approved by the shareholders, the bank will get 14 shares of Indiabulls Housing Finance for every 100 shares they hold.

The letter dated July 29 further stated that "after much reflection" Gehlaut had decided to cut promoters' stake in the bank to less than 10 per cent after receiving regulatory approval. As per SEBI norms, a combined promoters' holding of less than 10 per cent will fulfil the conditions of 'depromoterisation' in the new entity. Along with the other corporate promoters of Indiabulls Housing Finance, Gehlaut reportedly offered to 'declassify' themselves from being the 'promoter group' in the merged bank.

This means that they would lose the special rights that promoters enjoy under a company's articles of association and would no longer be required to make disclosures under insider trading rules. The promoters currently hold 21.5 per cent in Indiabulls Housing, which corresponds to a 19.5 per cent stake in the merged entity. Gehlaut had previously committed to keep the promoter group's stake at under 15 per cent.

The letter comes at a time when there is considerable pressure on Indiabulls Housing Finance. The mortgage lender on Wednesday reported a 24 per cent fall in profit after tax (y-o-y) to Rs 802 crore, along with worsening asset quality, in its June quarter results. And last month, BJP leader Subramanian Swamy accused the housing finance firm of laundering more than Rs 1 lakh crore over 14 years and requested PM Modi to form a special investigation team of the CBI, Enforcement Directorate, Serious Frauds Investigation Office and Income Tax officials to look into the matter. The group has refuted the allegations.

A senior banker told the daily that despite Gehlaut's letter, the RBI is likely to take its time to make a decision because "once this merger goes through, some of the other small, capital-starved private banks and NBFCs will explore merger".

Also read: Indiabulls group shares fall up to 12% on Subramanian Swamy's fraud allegation; company denies any wrongdoing