India’s leading private lender, Axis Bank, has approached the Reserve Bank of India (RBI) seeking approval to retain the maximum possible equity in its wholly owned subsidiary, Axis Finance, while diluting only a minimal stake to meet regulatory requirements and support future growth.
According to sources familiar with the matter, the move follows revised regulatory guidance from the RBI that allows multiple entities within a banking group to operate in the same line of business, provided there is board approval and sufficient justification. The updated stance offers greater flexibility compared to earlier proposals.
In October 2024, the RBI had issued its ‘forms of business’ circular proposing that only a single entity within a banking group could undertake a specific permissible business activity. Subsequently, the central bank reportedly informed Axis Bank that it would not be allowed to inject additional capital into Axis Finance to fund its expansion plans. This restriction prompted the lender to explore alternative routes to raise growth capital for its non-banking financial company (NBFC) arm.
As part of this strategy, Axis Bank initiated plans to dilute a portion of its holding in Axis Finance and bring in an external investor. The bank appointed Morgan Stanley to identify potential investors and structure the stake sale.
However, with the RBI now offering more regulatory clarity and flexibility, Axis Bank is understood to be seeking permission to retain a majority stake while ensuring compliance with prudential norms. Maintaining a larger ownership would allow the bank to preserve strategic control over Axis Finance, which plays a crucial role in expanding its retail and structured lending footprint beyond traditional banking operations.
Axis Finance has been instrumental in strengthening the group’s presence in segments such as wholesale lending, structured finance, and select retail products. Analysts believe that retaining significant ownership would help Axis Bank better align the subsidiary’s business strategy with the parent’s long-term objectives.
The outcome of the RBI’s decision will be closely watched by the banking industry, as it may set a precedent for how financial conglomerates structure their group entities under evolving regulatory norms.
Alternative Headlines:
Axis Bank Moves RBI to Keep Majority Control of Axis Finance
RBI Nod Sought by Axis Bank to Limit Stake Dilution in NBFC Arm
Axis Bank Eyes Minimal Dilution in Axis Finance Amid Policy Shift
Regulatory Flexibility Prompts Axis Bank to Review Stake Sale Plan
Axis Bank Reworks Capital Strategy for Axis Finance Following RBI Guidance
Axis Bank Seeks RBI Approval to Retain Majority Stake in Axis Finance
