Bandhan Bank may ask RBI to relax holding company rule

Bandhan Bank might ask the Reserve Bank of India (RBI) to relax the rule that the promoters’ stake must be brought down to 40 per cent in the holding company.

At present, Bandhan Financial Services is the 100 per cent owner of Bandhan Financial Holding, a non-operating financial holding company. Which, in turn, has promoted and owns 89.62 per cent stake in Bandhan Bank. After the initial public offering (IPO) of equity, which opens later this week, the promoter holding in Bandhan Bank will go down to around 82 per cent, from nearly 89 per cent at present.

RBI's licensing norms require any bank offering 'universal' services to bring down the promoter holding to 40 per cent. However, the Securities and Exchange Board of India's rules also call for a year's lock-in period for promoter holding after an IPO.

Bandhan Financial Services, a non-banking finance company (NBFC) and at the helm of the holding company structure, has a promoter holding of 40.73 per cent. The promoter holding here is held by two trusts-Financial Inclusion Trust at 32.91 per cent, and North East Financial Inclusion Trust at 7.82 per cent. In 2009, when Bandhan converted from a non-government organisation to an NBFC, the latter entity had issued the shares to the two trusts.

While representing its case, Bandhan Bank is expected to seek RBI approval for merging the three entities—Bandhan Financial Services, Bandhan Financial Holding and Bandhan Bank. In which case, the promoter holding in the bank will be counted as 40.73 per cent, said sources. C S Ghosh, managing director of the bank, refused to comment on the issue, while maintaining that the bank would follow the RBI guidance.

The RBI has been in favour of a holding company structure, to prevent any misuse of depositor money. Business Standard asked it for comment on this report but did not get any till the time of printing.

The bank might approach the RBI after the IPO, say sources. The offer opens on Thursday, with the bank expecting to raise close to ~45 billion. The entity is valued at around ~450 billion and this is seen as one the biggest banking IPOs in the recent past. The price band fixed for the issue is ~370-375 a share, the face value being ~10.