Money & Banking

RBI, Kotak Bank thrash out deal on diluting promoter stake norms

Our Bureau Mumbai | Updated on January 30, 2020 Published on January 30, 2020

Uday Kotak, MD and CEO, Kotak Mahindra Bank (file photo).   -  BUSINESS LINE

Lender to withdraw writ petition, lower promoter holding to 26% within six months of RBI’s final approval

Kotak Mahindra Bank has reached a settlement with the the Reserve Bank of India on the issue of diluting the promoter stake in the private sector lender.

Consequent to this agreement, the bank said in a regulatory filing that it is withdrawing the writ petition in the Bombay High Court. As per the agreement reached, the promoter stake in the bank will be diluted to 26 per cent in six months after final approval from the regulator.

The RBI had originally asked the promoter of the bank to reduce his shareholding to 15 per cent of the paid-up equity capital by March 2020. As on December 31, 2019, promoters held 29.96 per cent stake in the bank with its founder and promoter Uday Kotak holding the lion’s share of 29.67 per cent stake.

Softening its stance, the RBI has in principle accepted the proposal for capping the promoters’ voting rights in the bank at 20 per cent of the paid-up voting equity share capital (PUVESC) until March 31, 2020. From April 1, 2020, the promoters’ voting rights in the bank will be further lowered and capped at 15 per cent of PUVESC.

“Thereafter, the promoters will not purchase any further paid up voting equity shares of the bank till the percentage of promoters’ shareholding reaches 15 per cent of PUVESC of the Bank or such higher percentage as may be permitted by RBI from time to time,” the bank said in the filing.

The promoters will be entitled to purchase paid-up voting equity shares of the bank up to 15 per cent of the PUVESC of the bank or such higher percentage as may be permitted in the future, and exercise voting rights on such shares, it further said.

The bank said it had submitted letters to the RBI on the proposal on August 19 last year and then on January 10 this year after which the regulator conveyed its in-principle acceptance on January 29. It however, did not outline a roadmap for reducing promoter stake.

The tussle between the bank and the RBI has been going on for at least five years. Kotak Mahindra Bank had in August 2018 issued non-convertible PNCPS on a private placement basis to raise ₹500 crore, following which its paid-up capital had increased from ₹953.16 crore to ₹1,453.16 crore. The RBI had, however, said that this did not meet promoter dilution norms.

The lender had then in December 2018 filed the writ petition on the Banking Regulation Act, and had sought validation on whether its issuance of PNCPS met the regulatory requirements.

The bank’s scrip closed 0.8 per cent lower at ₹1,628.10 apiece on the BSE.

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Published on January 30, 2020
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