UAE's Emirates NBD Bank PJSC is in the final stages of acquiring RBL Bank, involving an investment of 15,000 crore rupees. Following the deal, it will hold a 51 percent stake in the bank. This move will strengthen the Middle Eastern bank's presence in India, and RBL Bank's shares have seen a record surge.
RBL Bank: A major deal is on the horizon in India's private banking sector. Emirates NBD Bank PJSC, UAE's second-largest bank, is in the final stages of investing 15,000 crore rupees to acquire RBL Bank. The deal will be conducted through equity shares and warrants, after which Emirates NBD's stake in the bank will reach 51 percent. This acquisition will strengthen the bank's presence in the India-West Asia remittance market. RBL Bank shares have recently reached record levels, and a formal announcement may be made during RBL's board meeting on October 18.
Foreign Shareholding Upon Deal Completion
RBL's current market capitalization is approximately 17,786.8 crore rupees. Upon the completion of this investment, Emirates NBD Bank will hold 51 percent of the bank's expanded equity capital. This will make the UAE bank the largest and controlling shareholder of RBL, ensuring a b presence of the foreign bank in the bank's operations and decision-making process.
Sources indicate that the RBI has recently given in-principle approval for this change in control. This investment will enhance Emirates NBD's presence in Asia and strengthen the bank's position in the high-growth India-West Asia remittance market. According to RBI data, Indian expatriates residing in Gulf countries contribute approximately half of the total remittances sent to India. In FY2024, an amount of $38.7 billion came to India from Gulf countries, with the UAE contributing the most.
RBL Bank Board Meeting and Formal Deal Announcement
RBL Bank is scheduled to hold a board meeting on October 18. In this meeting, the bank's quarterly and half-yearly results for the period ending September will be approved. Sources indicate that the formal deal announcement could be made during or before the meeting.
Kolhapur-based RBL Bank is a 100 percent public company, with several domestic institutions and mutual funds holding small stakes. EY and JP Morgan are acting as advisors in this deal.
Record Surge in RBL Shares
RBL Bank's shares have shown record performance in recent months. Last month, the shares saw a surge of 6.58 percent. So far this year, the shares have gained approximately 86 percent. On Tuesday, the bank's share was trading at 293.35 rupees on the BSE and touched a 52-week high of 299.65 rupees during the trading session.
Experts suggest that the structure of this deal will be similar to the recently concluded IHC-Honour Capital deal, which includes a preferential allotment and warrants followed by an open offer.
Other Major Banking Deals in the Country
This deal between RBL Bank and the UAE bank will be one of India's largest banking deals. Earlier this year, Japan's SMBC acquired a 20 percent minority stake in Yes Bank. Additionally, Mitsubishi UFJ Financial Group has been active in acquiring approximately 20 percent stake in Shriram Finance.
Such foreign investments have opened new opportunities and doors for global partnerships in the Indian banking sector.
RBI's FDI Norms and Controlling Stake
Under current FDI norms, total foreign participation in Indian private banks is permitted up to 74 percent. However, foreign shareholding in each unit is capped at a maximum of 15 percent. RBI regulations generally do not allow any foreign bank to acquire a controlling stake in an Indian bank.
However, there are some exceptions. For instance, Fairfax's acquisition of a 51 percent stake in the distressed Catholic Syrian Bank by Prem Watsa in 2018, and DBS'ss acquisition of Lakshmi Vilas Bank in 2020. Even in these cases, the RBI has strictly enforced limits on voting rights, which are capped at 26 percent.
