1. To run small bank, Equitas looks to pare foreign holding from 93% to below 50%

To run small bank, Equitas looks to pare foreign holding from 93% to below 50%

To begin with, Equitas will merge its three subsidiaries — micro-finance, housing finance and non-banking finance company— into one entity

By: | Chennai | Published: September 22, 2015 12:24 AM

Equitas Holdings, a Chennai-based micro-finance institution (MFI) that recently got an in-principle nod from the RBI to set up a small finance bank, will have to pare down foreign investment to less than 50% from 93%.

The MFI has on board foreign investors such as Netherlands Development Finance Company, German Investment Development Corporation, International Finance Corporation (part of the World Bank group), Commonwealth Development Corporation (owned by the British government) and British alternative investment management company Creation Investments Capital Management, among others.

Speaking to reporters, PN Vasudevan, MD, Equitas Holdings, said the process of bringing down foreign investment has to begun now in the right earnest.

“It is one of the norms by the RBI, and it has to be done accordingly. I am sure domestic players will be there to buy our shares, especially because we are going to launch a small bank. We will have to complete the exercise in the next 18 months — the time-line set for the launch of the bank,” he said.

Elaborating on the preparatory work that needs to be done prior to launching a small bank, Vasudevan said it will be first merging Equitas’ three subsidiaries — micro-finance, housing finance and non-banking finance company— into one entity. Equitas Holdings, the holding company has three operating companies — Equitas Microfinance, Equitas Finance (for MSMEs) and Equitas Housing Finance. “We will merge these three companies to be later converted into the bank. Next big thing to be taken by the company would be setting up a technology platform for transition into banking services and setting up infrastructure,” he said.

According to him, most MFIs’ current branches do not look like a bank branch where typical lending was taking place. “ We have to design those branches into ‘banks’ and for that we have to work on the infrastructure,” he said. With the proposed banking foray,  Equitas with its 350-odd branch network across 11 states will be benefiting from the liabilities products side such as deposits, saving accounts and insurance.

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