Bangalore-based Ujjivan Small Finance Bank plans to approach the Reserve Bank of India in November with its proposal of reverse merger of the holding company with the bank and comply with the regulatory guidelines on promoter shareholding.

“We would apply with the RBI in early November, just three months before the end of the fifth year and go through the process of procedural approvals that are required. We expect the whole process of the reverse merger to take up to 12 months to get completed,” Nitin Chugh, MD & CEO, Ujjivan Small Finance Bank, told analysts at the earnings call for the April-June quarter of 2021-22.

For the quarter ended June 2021, Ujjivan Financial Services Limited, the promoter of the small finance bank, held 83.32 per cent of the total equity share capital of the bank. The promoter holding has to be diluted to 40 per cent within five years of the start of business. The bank will complete five years on January 31, 2022.

In June, the RBI had informed the Association of Small Finance Banks of India that it has decided to permit small finance banks and the respective holding companies to apply for the amalgamation of the holding company with the small finance banks three months prior to completing five years from the date of commencement of business.

This has set the ball rolling for small finance banks to bring down their promoter stake through the collapse of the holding company structure and give the shareholders of the holding company direct ownership in banks.

The board of Chennai-based Equitas Small Finance Bank approved a scheme of amalgamation on July 26, 2021, between promoter Equitas Holdings Limited and Equitas Small Finance Bank. The holding company had a 81.75 per cent stake in the bank as on June 30, 2021.

Bank officials informed analysts at the first quarter earnings call that the amalgamation process could take at least 12 months with approval needed from the RBI, Sebi, stock exchanges and NCLT. The board has approved a swap ratio of 226 shares of the small finance bank for every 100 shares of the holding company.