Mahindra & Mahindra (M&M), a diversified conglomerate with interests in automotive, technology services, and non-bank lending, has decided to venture into the formal banking sector. To achieve this, M&M is purchasing nearly 10 per cent of RBL Bank, a private-sector lender. Presently, M&M already owns 3.5 per cent of the bank, acquired through secondary market transactions.
Once the entire deal is finalised, Mahindra will become the largest stakeholder in RBL Bank, along with investment fund Maple.
This move by Mahindra comes at a time when there are regulatory concerns about business houses owning banks. The Reserve Bank of India (RBI) previously considered allowing such ownership, but public resistance led to the abandonment of that proposal. Mahindra Group already possesses a non-banking finance company (NBFC).
The company stated that they invested Rs 417 crore to acquire the 3.53 per cent stake in RBL Bank, and they are open to considering further investment, not exceeding 9.9 per cent, subject to pricing, regulatory approvals, and necessary procedures.
RBL Bank issued a clarification to the stock exchanges, responding to media reports about Mahindra’s interest in taking a strategic stake of over 15 per cent in the bank. The bank clarified that Mahindra’s current shareholding is 3.53 per cent and any shareholder seeking to acquire five per cent or more must obtain prior approval from the RBI, which they have not received so far.
This development is the latest in RBL Bank’s evolving story, which saw challenges in early 2020, followed by a capital raise in November 2020 to restore investor confidence. The bank’s shares have shown a significant increase in value recently.
Mahindra Financial Services, M&M’s NBFC, reported a loan book of Rs 82,770 crore as of March 2023.