ICICI Bank will acquire a 9.9% stake in non-banking finance company Kisan Rural Finance Ltd for Rs 17.82 crore ($2.5 million) in cash, the private-sector lender said.
The lender will buy about 14.9 million shares of Kisan Rural at Rs 12 apiece, it said in a stock-exchange filing. It expects to close the deal by the end of this month.
India’s second-largest bank in the private sector didn’t specify any reason for its investment. However, the acquisition could help the bank meet the regulatory requirement of priority-sector lending target of 40%.
ICICI Bank’s average priority-sector lending for 2017-18 was Rs 1,50,078 crore, or 37.7% of adjusted net bank credit, its annual report for the financial year shows.
The lender’s average lending to small and marginal farmers was Rs 17,072 crore, constituting 4.3% of the overall average against the requirement of 8%.
The non-bank lender is promoted by the Indian Farmers Fertiliser Cooperative Ltd (IFFCO), one of India’s biggest fertiliser makers.
The firm offers financing for new and used tractors along with motor credit and life insurance products to the farmer community, according to its website.
The Delhi-headquartered NBFC was incorporated in December 2017. It registered a net loss of Rs 48 lakh for 2017-18 on revenue of Rs 4 lakh.
ICICI Bank has been tying up with multiple companies to boost its business in the rural as well as small and medium enterprises (SMEs) segments.
In January, it tied up with NBFC Small Business FinCredit to jointly provide loans worth up to Rs 1 crore to SMEs. This partnership was formed based on the guidelines issued by the Reserve Bank of India in September 2018 that permitted banks to engage with NBFCs to co-originate loans for priority-sector assets.
In 2017-18, ICICI Bank’s lending to micro enterprises fell short of the target at 6.7% against the requirement of 7.5%.
To be sure, most private-sector and foreign banks failed to meet their priority-sector lending targets for 2017-18, as per the Reserve Bank of India. The banks also failed to meet targets for specific sectors such as agriculture and SMEs.
While public-sector banks met their priority-sector lending targets for agriculture of 18%, private banks and foreign banks failed to meet the targets at 16.2% and 16.7%, respectively.
Besides tying up with NBFCs, ICICI Bank has also made a number of investments in fin-tech startups.
In July last year, it invested Rs 8.72 crore in Mumbai-based mobile payments startup ePaylater to pick up a 9.9% stake.
In an interview with TechCircle last July, B Madhivanan, the lender’s chief technology and digital officer, said the bank had kept aside Rs 100 crore for investment in fin-tech startups.
Some of its other fin-tech investments include Tapits Technologies, a mobile payments startup; FingPay, which offers an Aadhaar-based payments system and which is deployed in the bank’s Eazypay app; and Arteria, which provides a cloud-based payments solution for supply chain players.