Mumbai, Oct. 10 -- The Reserve Bank of India (RBI) on Wednesday rejected the proposed merger between Lakshmi Vilas Bank and Indiabulls Housing Finance Ltd, scuppering the first ever attempt by a non-bank lender to merge with a bank in the country.

"This is to inform that RBI vide their letter dated October 09, 2019, informed that the application for voluntary amalgamation of Indiabulls Housing Finance Ltd and Indiabulls Commercial Credit Ltd with The Lakshmi Vilas Bank Ltd cannot be approved," the bank said in a filing to stock exchanges.

Uncertainty around the banking regulator's approval has been an overhang on the two stocks, with shares of Indiabulls Housing losing 73.45% and Lakshmi Vilas Bank losing 71% since the all-stock merger ...