LIC to up stake in Kotak Bank to nearly 10%

The Reserve Bank of India (RBI) has allowed Life Insurance Corporation of India (LIC) to increase its stake in Kotak Mahindra Bank to up to 9.99 per cent, the private sector lender said on Monday. LIC has a 4.96 per cent stake in the bank as of September 30, 2021 and is its fifth largest shareholder.

“Kotak Mahindra Bank has received an intimation from LIC stating that the RBI has granted its approval to LIC for increase its holding in the bank upto 9.99 per cent of the paid up equity share capital of the bank,” Kotak said in a regulatory filing.

The approval is valid for a period of one year.

The RBI on Friday announced reformed rules on the ownership guidelines and corporate structure for Indian private sector banks where it approved an increase in the promoter ownership limit to 26 per cent of the voting share of a bank for both existing and newly licensed banks. Promoters who have already diluted their holdings to below 26 per cent will also be eligible to increase their stake back up to 26 per cent.

In the past, promoters of a few banks such as IndusInd Bank had applied to the RBI for increasing their holdings shortly after it allowed promoters of Kotak Mahindra Bank to maintain promoter holding at 26 per cent based on their licensing conditions.

The increase in the promoter holding will enable promoters to infuse capital and increase their stake and curtail the limit to which promoters now need to reduce stake either for newly licensed banks or cases where bank takeovers have occurred.

“We believe this will be positive for banks such as IndusInd Bank, HDFC Bank, and DCB Bank as their promoters, the Hinduja Group, HDFC Limited, and the Aga Khan Fund can increase their stake to 26 per cent (if they choose to),” said analysts of Axis Securities.