RBI Said To Reject SBI Plan To Raise Stake In Investec Unit

The Reserve Bank of India turned down a proposal by the country’s largest bank to increase its stake in an institutional equities joint venture with a local unit of Investec Plc, according to people familiar with the matter.

SBI Capital Markets Ltd., an arm of State Bank of India, had sought the central bank’s approval to increase its shareholding in the partnership to around 40%, from about 20%, the people said, asking not to be identified discussing private information. Concerns centered on duplication of businesses within the wider group of SBI companies, one of the people said. 

The regulator has asked SBI to either move to full ownership or else ensure compliance with proposed rules on financial entities, the person added. Representatives for the RBI, SBI and Investec didn’t reply to requests for comment.

Investec India’s businesses span corporate advisory, private credit, institutional equities and research, as well as equity capital markets. Investec teamed up with SBI Capital Markets in 2020 to help both outfits grow their scope in ECM. 

An RBI draft document from October 2024 shows multiple entities within a banking group can’t do the same business or hold the same category of license from a financial sector regulator. It also states that overlapping lending activities between a bank and its subsidiaries isn’t permitted.

However, RBI Governor Sanjay Malhotra said earlier this month that the final guidelines will drop proposed limits on business overlaps between banks and their group entities, giving boards more freedom on strategic allocations. Such measures are yet to be released.

SBI plans to submit a fresh proposal once the final guidelines are issued, one of the people said.