RBI Tells Kotak to Cut Pro­moter Stake in Bank to 40% by Sept

Pro­moter hold­ing in bank at 43.58%; Uday Kotak di­rectly holds 39.76%

The Economic Times - - Markets + Finance - OUR BUREAU

The Re­serve Bank of In­dia has di­rected Kotak Mahin­dra Bank’s pro­moter Uday Kotak to pare the hold­ing of pro­mot­ers to 40% by Septem­ber. “The RBI has di­rected the bank to bring down its pro­moter share­hold­ing to 40% by Septem­ber 30, 2014, as per es­ti­mates pro­vided by the bank. The next es­ti­mate is 30% by De­cem­ber 31, 2016,” the bank said in a state­ment to the stock ex­change. The pro­moter hold­ing in the bank is 43.58%; Uday Kotak di­rectly holds 39.76%. An email query sent to the pri­vate sec­tor lender re­mained unan­swered. The cap on pro­moter’s hold­ing in the bank is a point of con­tention. The de­clared pol­icy is that no pro­moter should hold more than 10%. Re­cently, the PJ Nayak com­mit­tee on gov­er­nance in banks pro­posed that pro­mot­ers be al­lowed to re­tain up to 25% eq­uity stake in banks. Kotak Mahin­dra Bank was giv- en a bank­ing li­cence by RBI in 2003. The bank has main­tained that the con­di­tion of the li­cence was the pro­moter’s con­tri­bu­tion would be a min­i­mum of 49%, which was locked in for a min­i­mum of five years. This re­quired the pro­mot­ers to hold 49% till at least 2008. The bank has in the past said there was no re­quire­ment to di­lute pro­moter hold­ing to be­low 49%. This is con­trary to what is be­ing pro­posed now for new bank li­cences. Sub­se­quent to 2003 and the li­cence, RBI has an­nounced pol­icy changes on this sub­ject from time to time. Pro­moter Uday Kotak cut the stake to 39.76% from 63% at the time of ac­quir­ing the li­cence, but it is still more than the cur­rently pre­scribed limit. Ac­cord­ing to the road map dis­cussed with the reg­u­la­tor, the pro­moter’s stake will have to be pared to 20% by March 31, 2018. “The long-term ob­jec­tive of the bank is to broad-base the share­hold­ing in a non-dis­rup­tive man­ner, keep­ing in mind the in­ter­ests of all stake­hold­ers,” the bank has said in the past. “The bank continues to be in di­a­logue with RBI for a fea­si­ble road map for fur­ther di­lu­tion. The bank is com­mit­ted to fol­low the statu­tory di­rec­tions of RBI,” it had said. With a cap­i­tal ad­e­quacy ra­tio of 19.1%, the bank was in no hurry to raise cap­i­tal, an­a­lysts said. Uday Kotak could look at a com­bi­na­tion of tap­ping the mar­kets or an in­or­ganic growth op­tion, a bank­ing con­sul­tant with a do­mes­tic au­dit and con­sul­tancy firm said on the con­di­tion of anonymity. “Tap­ping the eq­uity mar­ket may not be good for ex­ist­ing share­hold­ers, so it is pos­si­ble he could look at get­ting in a strate­gic in­vestor. How­ever, in the long-term, the bank could look at the in­or­ganic growth op­tion, which would help di­lute pro­moter hold­ing and add scale,” the con­sul­tant said,.

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