The RBI has shot down the proposal of Muthoot Finance to acquire IDBI Bank’s mutual fund business.

According to the central bank, sponsoring a mutual fund is not in consonance with the activity of an operating non-banking finance company.

IDBI Bank had entered into a share purchase agreement with regard to the sale of IDBI Mutual Fund to Muthoot Finance on November 22, 2019.

“The agreement was entered into by and between Muthoot Finance, IDBI Bank, IDBI Capital Markets & Securities, IDBI Asset Management and IDBI MF Trustee Company... for acquisition by Muthoot Finance of 100 per cent equity shares of IDBI Asset Management held by IDBI Bank and its nominees and IDBI Capital Markets & Securities, and 100 per cent equity shares of IDBI MF Trustee Company held by IDBI Bank and its nominees,” IDBI Bank said in a regulatory filing to the bourses on Tuesday.

It added that the acquisition was subject to receipt of necessary regulatory approvals from Sebi and other regulators.

“As advised by Muthoot Finance, we (IDBI Bank) would like to inform that their request for a no objection certificate was not acceded to by the RBI on the ground 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," IDBI Bank said.