MUMBAI: Axis Bank, the country’s third largest private sector lender, said on Wednesday that it will pour as much as ₹1,500 crore as capital into its wholly owned subsidiary Axis Finance. The bank’s board approved the infusion into the non-banking financial company (NBFC) in one or more tranches by March 31, 2027 by subscribing to its rights issue. The investment was approved by the Reserve Bank of India vide its letter on March 10, according to an exchange filing by the lender.
The acquisition falls within the related party transactions. This follows the central bank’s revised guidelines, which allow multiple entities within a banking group to undertake the same line of business, subject to board approval and adequate rationale and justification.
Following the RBI’s October 2024 ‘forms of business’ circular, which proposed that only a single entity within a bank group could undertake a particular form of permissible business, Axis Bank was told it could not infuse extra capital into Axis Finance to fund its growth. As a result, the bank sought to bring in an investor by diluting a portion of its stake in Axis Finance to raise capital for expansion and appointed Morgan Stanley to find investors.
With the revised guidelines removing the clause that barred banks and their subsidiary NBFCs from operating in the same line of business, Axis Bank had the option to infuse capital into its NBFC subsidiary.
Accordingly, the lender approached the RBI with a proposal to infuse capital in Axis Finance, given its strong performance.
In January, during its earnings call, Axis Bank said it was exploring all options to infuse capital into Axis Finance, including a stake sale to strategic investors. “We will continue to ensure that capital is not a constraint for the business. We are exploring all options to infuse capital, based on regulatory guidance and recent changes in guidelines,” the bank’s management had said. “We are also evaluating a stake sale as one of the options. That option is not off the table,” they had added.
The lender had guided that Axis Finance is expected to become an upper-layer NBFC by 2026-27, after which, the bank will look to list the company. Under RBI norms, an NBFC classified as upper-layer must list its shares on a stock exchange within three years of being identified as such.
Axis Finance offers customised financial solutions across retail, micro, small and medium enterprise (MSME), and wholesale segments. Its wholesale lending portfolio includes corporate loans, collateralised lending, and real estate financing. The retail segment covers loans against property, home loans, personal loans, and business loans. The MSME vertical focuses on small-ticket corporate lending, largely backed by collateral, with a strong presence in non-metro markets.
Source: Business Standard
