RBI turns down Muthoot Finance’s proposal to acquire IDBI MF

Reserve bank of India refused to pass approval to Muthoot Finance’s proposed acquisition of IDBI Mutual Fund. Muthoot Finance Limited’s request for no objection certificate was declined on the basis 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”, the company said in a stock exchange filing.

Muthoot Finance, the country’s largest gold financing company, on Friday had announced its entry into an agreement to acquire IDBI Bank’s mutual fund unit, marking its entry into mutual fund asset management space. Muthoot Finance, in an exchange filing, on Friday reported that it has agreed to buy IDBI Asset Management Ltd and IDBI MF Trustee Company or a total consideration of Rs 215 crore. The company said the transaction is expected to be delivered by end of February 2020, subjected to requisite approval from the regulators including Securities and Exchange Board of India.


IDBI Asset Management also addressed as IDBI Mutual Fund, controlled 22 schemes during FY20, including 12 equity fund schemes, six debt fund schemes, two-hybrid fund schemes and one each Gold Fund of Funds and Gold Exchange Traded Funds scheme. Promoted by IDBI Bank, IDBI Mutual Fund is one of the profit-making asset management company in the mutual fund space with assets under management (AUM) of over Rs 5,300 crore. As on March 31, 2019, IDBI Bank owned 66.67 per cent stake in IDBI Asset Management and 33.33 per cent holding in IDBI Capital Markets and Securities.

In May this year, IDBI Bank invited expression of interest for its mutual fund business to reduce the huge heap of bad loans as the lender has the worst asset quality among Indian banks. On Monday, the global rating agency, Moody’s Investor Service said Muthoot Finance’s main service offered, gold loans shall aid in boosting its asset quality, specifying that it does not foresee a drop in gold prices and the greatest risks while lending against gold, to occur. Muthoot also boasts of a grand profit which will help maintain capitalisation and funding at the current strong level, the rating agency further added.