KOLKATA: The Reserve Bank of India has rejected non-bank lender Muthoot Finance NSE 0.33 %’s proposal to acquire IDBI Asset Management Company on the ground of synergy – or the obvious lack of it.

“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 regulator told the gold-loan company.

IDBI Bank, which was planning to sell its mutual fund business for Rs 215 crore to comply with regulations, will now have to find a new buyer. IDBI Bank, which is a subsidiary of Life Insurance Corporation, has to divest its share in the AMC since LIC already has a mutual fund unit.

“We would like to inform (you) that Muthoot Finance Ltd’s request for a no objection certificate was not acceded to by the Reserve Bank of India,” the Kerala-based non-bank lender said Tuesday in a regulatory filing to stock exchanges.

Muthoot had entered into a share purchase agreement with IDBI Bank, and IDBI Capital Markets & Securities, IDBI Asset Management and IDBI MF Trustee Company a year back to fully acquire the asset management company.

Muthoot, which offers loans against gold jewellery, has strong profitability that helps it maintain strong capitalization and funding, Moody’s Investors Service said Monday.”Muthoot’s funding was steady as the secured and highly liquid nature of its loans enabled it to continue to obtain funding from banks and debt investors. A surge in prices of gold, which backs about 90% of the company’s loans, helped improve loan collections and disbursements,” Moody’s said.

Source: Livemint


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