1. AU Small Finance Bank Limited 2. Fincare Small Finance Bank Limited — Combination C-2023/11/1081

Notice under Section 6(2) of the Competition Act, 2002 jointly given by AU Small Finance Bank Limited and Fincare Small Finance Bank Limited

CORAM:

Ms. Ravneet Kaur Chairperson

Mr. Anil Agrawal Member

Ms. Sweta Kakkad Member

Mr. Deepak Anurag Member

Order under Section 31(1) of the Competition Act, 2002

1. On 28th November 2023, the Competition Commission of India (‘Commission’) received a notice under sub-section (2) of Section of the Competition Act, 2002 (‘Act’) jointly given by AU Small Finance Bank Limited (‘AU’) and Fincare Small Finance Bank Limited (‘Fincare’). The notice was filed pursuant to the Implementation Agreement dated 29th October 2023 executed between AU, Fincare and Fincare Business Services Limited (‘FBSL’) [Hereinafter, AU and Fincare are collectively referred to as ‘Parties’].

2. The Proposed Combination envisages the merger of Fincare into AU, with AU being the surviving entity pursuant to a scheme of arrangement under Regulation 44A of the Banking Regulation Act, 1949. In consideration for the merger, the shareholders of Fincare will receive 579 full paid equity shares of AU for every 2,000 equity shares held in Fincare.

3. In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011, vide letter dated 14th December 2023, certain information and clarifications were sought from the Parties. The Parties submitted the response to the same vide its letter dated 28th December 2023. Since the response was not complete, another letter dated 2nd January 2024 was issued and the Parties submitted the complete response vide letter dated 10th January 2024.

4. AU is a public listed banking company, where the majority shareholding (i.e., 25.49%) is held by the promoter group namely Mr. Sanjay Agarwal and his family, and the remaining shareholding is dispersed. AU provides personal and commercial banking services including the provision of deposits, loans and advances, debit and credit card services, institutional banking, and digital banking services. AU is also licensed to transact business under the AD-II bank category (foreign exchange). It is also engaged in the distribution of insurance and investment products such as mutual funds, portfolio management services and demat and trading accounts.

5. Fincare is a public limited banking company, where the majority shareholding (i.e., 78.58%) is held by the promoter group viz. FBSL, and the remaining shareholding is dispersed. Fincare provides deposit services, lending services including retail and microfinance loans, and digital banking services. It also provides other services such as demat and trading accounts and distribution of insurance products.

6. It is submitted that the Parties exhibit horizontal overlaps in the following broad segments of operation: (i) provision of deposit-taking services, (ii) provision of loans and lending services, (iii) provision of digital payment services and (iv) distribution of insurance products, in India. The Parties also exhibit overlaps in certain sub-segments within these broad segments.

7. The Commission decided to leave the delineation of the relevant market open, as it was observed that the Proposed Combination is not likely to cause an appreciable adverse effect on competition in any of the plausible relevant market(s) in India because of the reasons mentioned in the subsequent paragraph.

8. Based on the submissions of the Parties, the Commission noted that the combined market shares of the Parties in all the broad segments as well as overlapping sub-segments thereof, are insignificant. Further, there are large players such as State Bank of India, HDFC Bank, ICICI Bank, Punjab National Bank, Axis Bank, etc. and other small finance banks present in these segments which are providing similar services.

9. Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.

10. This order may be revoked if, at any time, the information provided by the Parties is found to be incorrect.

11. The information provided by the Parties shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act.

12. The Secretary is directed to communicate to the Parties accordingly.