Reserve Bank of India The RBI recently issued a notification stating that promoters can hold 26 per cent shares in the bank, up from the previous rule of holding only 15 per cent stake. In a recent panel meeting last week, the central bank accepted most of its working group’s recommendations on corporate ownership of private sector banks, allowing unrestrained promoter shareholding in the first five years of the bank’s operations. RBI’s new bank ownership rule will benefit major banks like Kotak Mahindra Bank and IndusInd Bank, which have been seeking more time from the regulator to sell their stake for several years.
So, the vested overhang on Kotak Mahindra Bank now stands nil. Bank’s Managing Director Uday Kotak need not sell his 26 per cent stake in the bank RBI’s new bank ownership rule,
According to CNBC- TV18’s Latha Venkatesh, this could also be an advantage for IndusInd Bank as Hinduja has already made a statement that as soon as the instructions come, they will increase the stake.
While all new investments will have to cross the RBI’s ‘fair and reasonable’ hurdle, it can still be a positive.
The central bank accepted 21 of the 33 recommendations of the Internal Working Group, saying the remaining suggestions were under consideration.
RBI constituted the working group on June 12, 2020, and the panel submitted the report on November 20, 2020, inviting comments from stakeholders and members of the public by January 15, 2021.
The report favors continuation of a minimum 40 per cent stake for the first five years to ensure that the promoters maintain their skin in the game and the credibility of the promoter group’s control till the business is properly established and stable. It will also ensure that the promoter remains committed to provide the necessary strategic direction to the bank in the initial years.
There is no need to fix any cap on promoters’ holding in the initial five years as the extant licensing guidelines mandate no cap on promoter’s shareholding in the first five years as it may be challenging for a new bank to raise capital initially. external sources or investors. Hence allowing them to hold higher stake will help the promoter to utilize the additional capital, as and when required, the RBI said while accepting the report.
More importantly, RBI has also accepted the suggestion of raising the cap on promoters’ stake over a long period of 15 years to 26 per cent from the current 15 per cent of the bank’s paid-up voting equity share capital. . ,
However, RBI said that this condition should be same for all types of promoters and it would not mean that promoters, who have already reduced their stake below 26 per cent, have to increase it to 26 per cent of the paid-up. will not be allowed. Voting equity share capital of the Bank. The promoter can choose to reduce the holding to less than 26 per cent at any time after the lock-in of five years, if he so desires.
Recognizing this, RBI clarified that the non-promoter shareholding in the case of natural persons and non-financial institutions/entities shall be limited to 10 per cent of the paid-up voting equity share capital and 15 per cent of the paid-up equity share capital. Voting equity share capital of the bank in case of all categories of financial institutions/institutions, supranational institutions, public sector undertakings or Govt.
(with PTI inputs)
read all breaking news, breaking news And coronavirus news Here. follow us on Facebook, Twitter And Wire,
,