Kotak Mahindra Bank Gets RBI Approval To Cut Promoter Shareholding
Kotak Mahindra Bank is now moving towards withdrawing a case it had filed against RBI over the promoter shareholding matter.
The Reserve Bank of India has granted its final approval to Kotak Mahindra Bank for reducing promoters’ stake in the lender to 26 percent, the company said Wednesday.
On Jan. 30, 2020, billionaire Uday Kotak-led lender and the banking regulator had reached an agreement over the promoter stake dilution. In a notification to stock exchanges on that day, Kotak Mahindra Bank said RBI has conveyed its in-principle agreement of the following:
- Promoters voting rights in the bank to be capped at 20 percent of paid-up voting equity share capital until March 31, 2020.
- Promoters’ voting rights in the bank to be capped at 15 percent from April 1, 2020, onwards.
- Promoters’ shareholding in the bank to be reduced to 26 percent within six months from the date of final approval of the RBI.
- Thereafter, the promoters will not purchase any further paid up voting equity shares’ of the nank till the percentage of promoters’ shareholding reaches 15 percent.
"Further to our intimation dated 30th January 2020...Reserve Bank of India has granted its final approval vide its letter dated 18th February 2020 in the matter relating to dilution of promoters' shareholding in the bank," Kotak Mahindra Bank said in a regulatory filing.
With this, the bank is also moving towards withdrawing a case it had filed against RBI in the Bombay High Court over the matter.
"Our board of directors has resolved to abide by the above. The bank is withdrawing writ petition No. 3542 of 2018 filed by it in the High Court of Bombay," Kotak Mahindra bank had said in its Jan. 30 filing.
As on date, promoters hold 29.96 percent in the company.
The private bank had in August 2018 proposed issuance of perpetual non-cumulative preference shares to cut promoter shareholding to 19.70 percent, which RBI rejected. The bank then challenged the central bank’s contention in the Bombay High Court.
According to RBI's bank licence norms, a private sector bank's promoter will need to pare holding to 40 percent within three years, 20 percent within 10 years and to 15 percent within 15 years.
Also Read: Kotak Mahindra Bank Vs RBI: A Story In Letters
In 2003, Kotak Mahindra Group's non-banking financial arm Kotak Mahindra Finance received a banking licence from RBI, becoming the first NBFC to convert into a bank.
On Wednesday, the lender’s shares rose 0.51 percent to Rs 1,699.60 apiece on the NSE while the benchmark Nifty 50 gained 1.15 percent to end the day at 12,130.30 points.