RBI Rejects ESAF Small Finance Bank’s Stake Transfer Plan To Dia Vikas Capital

The Reserve Bank of India has rejected a proposal by ESAF Small Finance Bank to issue a 12.17% stake to Dia Vikas Capital, a move that was aimed at reducing promoter shareholding in the bank.

Currently, ESAF Financial Holdings, the promoter of ESAF SFB, holds a 52.92% stake in the lender. As per small finance bank licensing norms, promoters are required to bring down their stake to 26% within 12 years of commencing operations—by 2032 in ESAF’s case.

The proposal, submitted in December 2024, sought to restructure shareholding by cancelling Dia Vikas Capital’s existing stake in the promoter company and issuing it direct equity in the small finance bank. The arrangement was expected to help ESAF Financial Holdings meet the Reserve Bank’s ownership dilution requirements without changing the overall effective control structure.

With the central bank’s rejection, ESAF Financial Holdings will now need to explore alternate routes to comply with shareholding guidelines. The setback could delay the promoter’s timeline for bringing down its stake, unless a fresh mechanism is approved by the regulator.

This development comes amid the RBI’s cautious stance on ownership and licensing matters. Recently, the central bank also returned Jana Small Finance Bank’s proposal for a universal banking licence, underscoring its scrutiny of ownership structures and compliance readiness among small finance banks seeking to transition or diversify.

The Bengaluru-headquartered lender had applied to transition from a small finance bank to a universal bank in June this year.

The application was made in compliance with the RBI guidelines for 'on tap' licensing of small finance banks in the private sector, issued on Dec. 5, 2019, and in accordance with the RBI circular on the voluntary transition of small finance banks to universal banks, on April 26, 2024.