Reserve Bank of India blocks Muthoot Fin-IDBI MF deal

NEW DELHI:  Muthoot Finance on Tuesday said that the Reserve Bank of India (RBI) has rejected its proposed acquisition of IDBI Asset Management and IDBI MF Trustee Company, stalling its entry into the mutual fund asset management space. IDBI Bank, on the other hand, will now have to find a new buyer to comply with regulations.

The Kochi-headquartered gold loan financier’s request for a no objection certificate was not acceded to by the banking regulator on the grounds 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”, Muthoot Finance Ltd said in a stock exchange filing. Consequently, Muthoot informed Sebi that it is unable to proceed with the proposed transaction.

It was exactly a year ago that a definitive agreement was signed between the companies for the acquisition of 100 per cent equity shares of IDBI Asset and IDBI MF Trustee Company by Muthoot Finance for  a total consideration of Rs 215 crore. IDBI bank was looking to sell its stake in the MF arm ever since LIC bought a majority stake in IDBI Bank in January. 

The sale of the mutual fund business was necessitated since the new promoter, LIC, has its own mutual fund business and regulators were not in favour of letting them run the same business under two different entities. Promoted by IDBI Bank in 2010, IDBI MF runs 22 schemes with robust Assets Under Management (AUM) across products.

It’s one of the profit making AMCs with an AUM of Rs 5,384 crore. As on March 31, 2019, IDBI’s stake in IDBI Asset Management stood at 66.67 per cent, while IDBI Capital Markets and Securities owns 33.33 per cent. Currently, the mutual fund industry has 44 players managing assets to the tune of over Rs 26 lakh crore.