The Ministry of finance has issued draft guidelines for regional rural banks to raise resources from capital market, paving the way for raising funds via rights issue, private placement and initial public offerings (IPO), reported Business Line.
Currently, there are 43 RRBs sponsored by 12 Scheduled Commercial Banks with 21,892 branches across the country. As at March 2022, RRBs had deposits and loans and advances (net) aggregating ₹5,62,538 crore and ₹3,42,479 crore, respectively.
RRBs are jointly owned by the Government of India (GoI), the respective State Governments (SGs), and the Sponsor Banks (SBs), with equity contribution in the ratio (50:15:35).
According to the guidelines, the RRBs should consider issue of bonus shares (to reward existing shareholders who so far have not been paid dividends and have first claim on the existing reserves) and a rights issue in consultation with the merchant bankers and the sponsor bank.
The ministry said ideally, the entire value of the issue may first be placed through rights offer with the provision to facilitate promoter shareholders to subscribe/renounce the offer.
That part, of the proposed issue size still remaining unsubscribed may alone be taken forward for IPO based on the quantum and merits, it added.
Depending on the size of the issue, a private placement for the sale of equity shares to a relatively small number of selected investors may also be considered by the RRB’s Board of Directors.
Within this, the equity shares may be offered to large banks and insurance companies like LIC. Other private insurance companies, pension funds and mutual funds may be approached to subscribe in a book building process, per the ministry advisory.