Relief for Bandhan Bank promoters?

NEW DELHI: The Reserve Bank of India (RBI) may offer a breather to Bandhan Bank to dilute its promoter holding after allowing another private lender Kotak Mahindra Bank time to reduce the holding of its promoters, while capping their voting rights.
“RBI is looking to address the issue in a comprehensive manner in the coming days,” a source familiar with the discussions told TOI. The move is seen to be crucial to bring regulatory parity.
The RBI’s bank licence rules mandate that promoters of private banks need to reduce their shareholding to 40% within three years, 20% in 10 years and pare it to 15% in 15 years.

Currently, Bandhan Bank promoters hold 61% stake in the lender. Last September, RBI had disallowed the lender from opening new branches as it was not able to bring down the shareholding of non-operative financial holding company to 40%, which was prescribed in the licensing conditions. In addition, the regulator had ordered a freeze on the salary of the bank’s managing director and CEO Chandra Shekhar Ghosh. As a result, the new private sector player is stuck with a franchise of 1,094 branches across the country after a fast pace expansion in the initial five years of its operation.
At the time of regulatory action, the promoter’s holding was estimated at over 82%, which subsequently came down following the merger of Gruh Finance, HDFC’s affordable housing finance arm.
RBI special dispensation for Kotak Mahindra Bank, which got a licence in 2003 and was to reduce promoter holding several years ago, came after the lender dragged RBI to court in what was a rare move in the Indian banking sector where the banking regulator’s decisions are usually not challenged by entities that come under its purview. At the heart of the dispute was the bank’s plan of August 2018, when it had proposed to issue perpetual non-cumulative preference shares (PNCPS) to cut promoter holding to 19.7%, but it failed to convince RBI.
The new stake dilution plan for Kotak Mahindra Bank promoters comes with a cap on voting rights. The “deal”, finalised by RBI last week, requires MD & CEO Uday Kotak to sell his 4% stake by August.

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