RBI asks Kotak Bank to reduce promoters’ stake to 40% by Sept

Kotak Mahindra Bank is required to reduce its promoter shareholding to 40 per cent by September this year, the RBI informed the bank.

The private sector bank in a release to the Bombay Stock Exchange said, “With reference to earlier announcement dated June 27, 2012 intimating RBI's requirement to bring down Bank's promoter shareholding, Kotak Mahindra Bank Ltd has now informed BSE that the Bank has received a communication from the RBI to bring down its promoter shareholding to 40 per cent by September 30, 2014 per estimates provided by the Bank.”

The current promoter shareholding is 43.58 per cent. Hence, the bank’s promoters are required to shed 3.58 per cent of its share. Out of the total promoter shareholding, 40.09 per cent is owned by individuals and Hindu undivided family, another 3.49 per cent is held by the promoter through corporate bodies.

The bank further needs to reduce its stake to 30 per cent by December 31, 2016.

In June 2012, RBI had asked Kotak Mahindra Bank to reduce the promoter holding to 20 per cent by 2018 and 10 per cent by 2020 from then 45.21 per cent. The RBI’s directions to bring down promoters holding was in order to conform to extant banking licence regulations. Kotak bank converted itself into a full-fledged bank in 2003 from a non-banking finance company.

RBI then had also indicated that after that it will take a view on dilution over the next two years from 20% to 10% or such other percentage depending upon the prescription of promoter holding in the new bank guidelines.

At present, except for ICICI Bank, in all private banks, the promoter shareholding is above the limit, as on December 2013.

Besides Kotak, RBI is likely to ask Yes Bank Ltd with over 25 per cent promoter holding and DCB Bank Ltd with over 18 per cent holding to reduce their promoter stake. The central bank wants to diversify promoter holding in banks away from individuals and make it more institutionalised and improve corporate governance.

Recently, an RBI appointed committee headed by former Axis Bank Chairman PJ Nayak recommended that promoters be allowed to hold 25 per cent stake in private sector banks as against the present norm of 10 per cent. The norm on new bank licence has kept maximum promoter shareholding at 15 per cent.

According to the Nayak committee, since a separate category of investors, namely authorised banks investors (ABI) comprising all diversified funds which are discretionally managed by fund managers, are proposed to have 20 per cent stake in the bank, promoters naturally should have a higher share.

COMMENT NOW