L&T Finance Holdings is reportedly planning to acquire a stake in Indian private lender Yes Bank, in a move to become a banking entity, after RBI thwarted its banking license earlier.

Three people familiar with the development were quoted by The Economics Times as saying that the non-banking finance company is also exploring options for a possible merger.

Sources further add that a senior executive from L&T Finance has held discussions with Yes Bank promoter Rana Kapoor on the possibility of combining both companies.

It is believed that the proposed integration might enable the non-banking finance company to become a banking entity that could lower its cost of funds.

Even if the deal is in place, permission from the country’s premier bank RBI is required for purchase of any stake to buy above 5% by an individual, or an entity in a bank.

L&T Finance chairman and managing director YM Deosthalee refused to comment on the development.

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Earlier, L&T Finance, which owns less than 5% in City Union Bank, had tried to buy over 10% in an old bank; although, it failed to obtain approval from RBI.