RBI cracks whip on Band­han for vi­o­lat­ing share­hold­ing norms

Bank needs RBI ap­proval to open branches; MD's salary frozen

Business Standard - - FRONT PAGE - NAM­RATA ACHARYA

The Re­serve Bank of In­dia (RBI) has with­drawn the “gen­eral” per­mis­sion given to Band­han Bank to open branches and has frozen the re­mu­ner­a­tion of its man­ag­ing di­rec­tor (MD) and chief ex­ec­u­tive of­fi­cer (CEO), Chan­dra Shekhar Ghosh ( pic­tured), at the ex­ist­ing level, af­ter it failed to com­ply with the norm of bring­ing down pro­mot­ers’ share­hold­ing to 40 per cent by the dead­line of Au­gust 23. How­ever, the bank can open branches with the ap­proval of the reg­u­la­tor.

In a reg­u­la­tory dis­clo­sure, Band­han Bank in­formed the ex­changes that “since the bank was not able to bring down the share­hold­ing of non-op­er­a­tive fi­nan­cial hold­ing com­pany (NOFHC) to 40 per cent, as re­quired

un­der the li­cens­ing con­di­tion, gen­eral per­mis­sion to open new branches stands with­drawn and the bank can open branches with prior ap­proval of the RBI. The re­mu­ner­a­tion of the MD and CEO of the bank stands frozen at the ex­ist­ing

level, till fur­ther no­tice.” The li­cens­ing norms re­quire a bank to bring down pro­moter hold­ing to 40 per cent within three years of start­ing op­er­a­tions. Band­han Bank com­menced op­er­a­tions on Au­gust 23, 2015.

Band­han Fi­nan­cial Hold­ings Lim­ited (BFHL) acts as the pro­mot­ing com­pany for Band­han Bank, with the pro­mot­ers’ hold­ing at 82.28 per cent. The bank went for an ini­tial pub­lic of­fer­ing (IPO) in March this year, af­ter which the pro­moter hold­ing came down from 89.62 per cent.

Ac­cord­ing to the Se­cu­ri­ties and Ex­change Board of In­dia’s (Sebi’s) rules, pro­mot­ers have a manda­tory one-year lock-in pe­riod af­ter the IPO in which they can­not sell their shares.

Band­han Bank MD Chan­dra Shekhar Ghosh could not be reached for com­ments. How­ever, the bank said in the no­tice to the stock ex­changes, “The bank is tak­ing nec­es­sary steps to com­ply with the li­cens­ing con­di­tion.”

The RBI’s dik­tat will slow down the ag­gres­sive growth charted by the bank over the past three years. It started op­er­a­tions with 501 branches and took it to 937 by Au­gust 23 this year. It was plan­ning to have 1,000 branches by the year-end.

As of June 30, the bank had mo­bilised de­posits of ~307.03 bil­lion and its loan book stood at ~325.1 bil­lion, with a ma­jor­ity of loans be­ing mi­cro ones.

Ac­cord­ing to the an­nual re­port of Band­han Bank, Ghosh’s re­mu­ner­a­tion for 201718 was ~23.95 mil­lion, against ~19.47 mil­lion in 2016-17.

Ear­lier, one of the pro­pos­als mulled by Band­han Bank to re­duce the pro­mot­ers’ share­hold­ing was to merge Band­han Fi­nan­cial Ser­vices, Band­han Fi­nan­cial Hold­ing, and Band­han Bank. This would bring down the pro­mot­ers’ hold­ing to about 40 per cent. How­ever, in gen­eral, the RBI has been in favour of a hold­ing com­pany for a new bank, as it pro­tects de­pos­i­tor in­ter­ests. At present, Band­han Fi­nan­cial Ser­vices is the 100 per cent owner of Band­han Fi­nan­cial Hold­ings, a non-op­er­at­ing fi­nan­cial hold­ing com­pany.

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