The Reserve Bank of India (RBI) has rejected ESAF Small Finance Bank’s proposal which would have led to Dia Vikas Capital effectively being issued a 12.17% stake.

The denial will lead ESAF’s promoter, ESAF Financial Holdings, to find an alternative way to trim its shareholding in the small finance bank.

As of 30 September 2025, ESAF Financial Holdings holds a 52.92% stake in the bank. Besides, ESAF SFB managing director K Paul Thomas owns a 6.05%, shareholding data with the BSE showed. 

According to the small finance bank licensing norms, promoters are required to reduce their shareholding to 26% within 12 years of commencing operations. In ESAF’s case, this deadline is by 2032.

ESAF had proposed a scheme of arrangement which would have led to Dia Vikas Capital holding more than 12% in the bank. 

As per the proposal for restructure of shareholding, submitted in December 2024, Dia Vikas Capital’s existing stake in the promoter company would have been cancelled and it would have been issued direct equity in the bank. This would have helped ESAF Financial Holdings to dilute stake in the bank, as required by the RBI, without changing the effective control structure.

"The Reserve Bank of India vide email dated October 27, 2025 has informed that the acquisition of shares pursuant to the scheme by Dia Vikas Capital Private Limited, one of the identified shareholders under the scheme, in excess of 5 per cent of paid-up share capital of the bank cannot be acceded to," ESAF Small Finance Bank said in a stock exchange filing.

The bank said its board of directors is assessing the implications of the RBI's decision and is also evaluating alternative steps to bring down the promoter shareholding in order to comply with the RBI Bank Ownership Directions 2023.