The Bombay High Court will take up for hearing the writ petition by private sector lender Kotak Mahindra Bank on the issue of promoter-shareholding norms by the Reserve Bank of India on Tuesday.

The court had, on January 17, adjourned the hearing after the RBI senior counsel Venkatesh Dhond sought more time to file the affidavit in response to the writ petition.

The case is being closely followed as it is perhaps for the first time that a bank is approaching the courts on an RBI directive. Many bankers and experts, who did not wish to be named, see it as a direct challenge to the regulator.

At the core is the contentious issue of diluting the promoter shareholding in the bank to 20 per cent by December 31, 2018, from close to 30 per cent at present. The RBI had said the issuance of Perpetual Non-Convertible Preference Shares (PNCPS) by the lender in August last year did not meet its requirements for diluting the shareholding.

Kotak Mahindra Bank had filed the writ petition on December 10 last year on the Banking Regulation Act, and had sought validation on whether its issuance of PNCPS met the regulatory requirements. It is being heard by a two-judge bench of the Bombay High Court comprising justices BP Dharmadhikari and Sarang V Kotwal. It has not given any interim relief to Kotak Mahindra Bank, and had refused to grant a stay on the December 31, 2018, deadline set by the RBI.

Though there has been speculation that there could be an out-of-court settlement, both Kotak Mahindra Bank and RBI have remained silent on the issue and said the matter is sub-judice.

Meanwhile, pressure is mounting on the RBI to review the promoter shareholding norms, although it is unlikely to look into the issue at present.

Another private sector lender, Bandhan Bank, recently merged with Gruh Finance, which has been seen as a means to meet the RBI’s promoter shareholding norms.

On Monday, shares of Kotak Mahindra Bank gained 0.88 per cent to close at ₹1,248.85 apiece on the BSE.

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