RBI denies the proposal by Muthoot Finance to purchase IDBI MFF

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The federal reserve told Muthoot Finance that now the operation of supporting a mutual fund or holding an investment team is not consistent with the behavior of an NBFC investment firm”

MUMBAI: Muthoot Finance Ltd’s intended to purchase IDBI Asset Management Ltd or IDBI MF Trustee Company Ltd from IDBI Bank Ltd with IDBI Financial Markets & Bonds Ltd has not really been approved by the Reserve Bank of India (RBI), the non-bank banker said here on Tuesday.

Muthoot Finance was told by the banking system that the operation of sponsoring a fund manager or owning an investment team is not consistent with the operation of an operational NBFC.”

IDBI Bank holds a 66.67 percent stake in IDBI Wealth Management as of 31 March 2020, with IDBI Financial Institutions and Equity holding a 33.33 percent stake.

During FY20, IDBI Investment Management, also known as the IDBI Mutual Fund, operated 22 funds consisting of 12 equity fund schemes, six debt fund schemes, based proposed fund schemes, one and Gold Fund one and Gold Exchange Traded Products scheme each.

Meanwhile in January 2019, after the Central government approved it in August 2018, LIC completed its acquisition of a 51 percent stake in IDBI Bank.

Although the disease outbreak has affected the growth of loans at most investment banks, demand has increased for gold loan NBFCs. A Crisil research on 28 October figured out that cost of production loans will increase especially from persons meeting immediate individual needs and from microfinance institutions for capital expenditures to restart companies, with the covid-19 contagion lockdowns being raised slowly and wealth creation trying to claw back.

Krishnan Sitaraman, the managing partner of Crisil Ratings, said unlike other asset groups, gold loans didn’t have to face major problems in the acquisition and allocation or re-pledging of loans, except in April and May during the strict lockdown process.