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Conserve capital, the loud, clear message from RBI to NBFCs and banks

Muthoot Finance and Axis Bank are instances of the regulator objecting to acquisitions

Crony capitalism has built up slowly in India, emerging as a Frankenstein’s monster a decade and a half after politicians began to unchain the private sector in the early 1990s
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The RBI has repeatedly warned banks to conserve capital

Hamsini Karthik Mumbai
With assets under management (AUM) of Rs 47,000 crore and a liquidity comfort of 25 per cent tier-1 capital adequacy, the Reserve Bank of India’s (RBI’s) decision to reject Muthoot Finance’s application to buy IDBI Bank’s asset management company (AMC) for Rs 250 crore came as a surprise.

Lack of consonance with the activity of operating a non-banking financial company (NBFC) seems to be the reason behind the decision. For a lender diversified into segments such as microfinance and affordable housing, it is a natural aspiration to look beyond the usual streams of lending business. When larger peers such as HDFC

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First Published: Nov 25 2020 | 1:32 PM IST

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