RBI Blocks Dia Vikas Capital’s Bid for Over 5% Stake in ESAF Small Finance Bank

Image Source: Business Standard

The Reserve Bank of India (RBI) has rejected Dia Vikas Capital’s proposal to acquire more than 5% equity in ESAF Small Finance Bank. The decision, disclosed via exchange filings, underscores RBI’s cautious stance on ownership thresholds in small finance banks and signals tighter scrutiny of foreign investments.

In a regulatory development that could impact foreign investment flows into India’s small finance banking sector, the Reserve Bank of India (RBI) has denied approval to Dia Vikas Capital Pvt Ltd for acquiring more than 5% stake in ESAF Small Finance Bank Ltd. The rejection was formally communicated to the bank and disclosed through stock exchange filings on October 27, 2025.

Dia Vikas Capital, a social impact investor with a history of supporting microfinance institutions, had sought to increase its equity holding in ESAF SFB beyond the 5% threshold. Under RBI’s Banking Regulation Act, any acquisition of more than 5% in a banking entity requires prior regulatory approval. The central bank did not publicly disclose the reasons for the rejection, but such decisions typically hinge on factors like fit-and-proper criteria, capital structure, and governance standards.

ESAF Small Finance Bank, headquartered in Kerala, has been expanding its footprint across India, focusing on financial inclusion and rural lending. The bank recently reported strong Q2 earnings and continues to attract interest from institutional investors.

Key Highlights:

Proposal Rejected: RBI denies Dia Vikas Capital’s request to acquire >5% stake in ESAF SFB
Regulatory Threshold: Acquisitions above 5% require RBI’s prior approval under banking norms
Investor Profile: Dia Vikas Capital is a social impact investor focused on financial inclusion
Disclosure Date: October 27, 2025, via exchange filings
Bank’s Position: ESAF SFB remains committed to its growth strategy and regulatory compliance
Sector Implication: Signals RBI’s cautious approach to ownership changes in small finance banks

This development may prompt other investors to reassess their stake acquisition strategies in regulated banking entities, especially within the small finance segment.

Sources: Moneycontrol, Economic Times, Dia Vikas

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