Rescue and capital reorganisation of non PSU banks

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Yes Bank

  • In April 2020, the Reserve Bank of India (RBI) intervened to rescue Yes Bank, which was facing financial troubles, by facilitating an investment from State Bank of India (SBI) along with ICICI Bank, HDFC Bank, and Kotak Mahindra Bank. Initially acquiring a 48% share capital in Yes Bank, SBI later reduced its stake to 30% through a follow-on public offering (FPO) in subsequent months.

Lakshmi Vilas Bank

  • In November 2020, RBI directed DBS Bank India Limited (DBIL) to take over Lakshmi Vilas Bank (LVB) due to its negative net worth caused by mismanagement and failed merger attempts with non-banking financial companies (NBFCs). DBS India, initially operating with 12 branches, benefited significantly from LVB’s network of 559 branches. As part of the resolution, RBI required Tier-II bond holders to write off their investments in LVB.

Punjab and Maharashtra Co-operative Bank (PMC)

  • In January 2022, RBI mandated Unity Small Finance Bank Limited (Unity SFB) to absorb PMC Bank’s operations, which had been marred by mismanagement and an unsuccessful merger attempt with NBFCs or SFBs. Unity SFB, established by Centrum Finance and BharatPe, was permitted by RBI to merge with a cooperative bank for the first time, aimed at managing PMC Bank’s liabilities amidst a scandal.


  • HDFC Bank sought regulatory approval to merge with its parent company HDFC, which triggered concerns about potential breaches in capital holding limits. To address this, HDFC transferred its subsidiary Gruh Finance to Bandhan Bank in exchange for a 15% stake in the combined entity. Regulators granted permission to the combined HDFC entity and its subsidiaries to hold up to 9.50% stake (with up to 4.99% requiring no permission) in six banks, including ICICI Bank, Axis Bank, Yes Bank, Bandhan Bank, IndusInd Bank, and Suryoday Small Finance Bank, with a deadline of one year to comply with statutory limits.

Merger of Small Finance Banks (SFBs)

  • In October 2023, RBI approved the merger proposal of Fincare Small Finance Bank into AU Small Finance Bank, marking the first such amalgamation in the sector. The combined entity will operate under the name AU Small Finance Bank from April 1, 2024, with shareholders of Fincare receiving 579 AU shares for every 2000 shares held. This merger eliminates Fincare’s regulatory requirement to maintain a separate listing.

Revamp of Regional Rural Banks (RRBs)

  • Starting from late 2010, a new policy was implemented to merge Regional Rural Banks (RRBs) serving smaller localities across a few districts into state-level entities. This restructuring followed the merger of nationalized banks, increasing their equity in RRBs and thereby reducing competition among RRBs. The policy effectively transformed RRBs into subsidiary banks of their promoter nationalized banks at the state level.