Utkarsh SFB's reverse merger expected within a year, says MD & CEO

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Utkarsh Small Finance Bank expects its reverse merger to be completed within a year, said Govind Singh, managing director and chief executive officer (MD & CEO), Utkarsh Small Finance Bank, on Thursday. The bank has formally applied to the Reserve Bank of India (RBI) and, upon receiving the banking regulator's approval, will proceed with the process through the National Company Law Tribunal (NCLT), he said.

“We are in the process. Once the approval comes, it will take around 12 months... after that, we will go through the NCLT route,” said Singh.

The proposed reverse merger aims to align with the regulatory requirements set forth in the RBI's guidelines regarding the acquisition and holding of shares or voting rights in banking companies, issued on January 16, 2023. According to these guidelines, promoters are required to reduce their shareholding to 26 per cent within 15 years of starting banking operations.

Further, Singh said that microfinance loan growth may moderate and asset quality could face pressure following new lending restrictions imposed by the Microfinance Institutions Self-Regulatory Organisation (MFI SRO) on the sector. “It’s difficult to say whether this will last for two or three months, but I believe the primary challenge has been over-lending. In the short term, we're also experiencing some pressure on asset quality,” Singh added.