Kotak Mahindra Bank to withdraw court case against RBI, to pare promoter stake to 26% in six months

New Delhi: Private sector lender Kotak Mahindra Bank on Thursday said it will withdraw a case concerning dilution of promoters’ shareholding in the bank which it had filed against the RBI in the Bombay High Court. Kotak Mahindra Bank said the RBI has given its in-principle acceptance for reducing promoters’ shareholding to 26 percent of the paid-up voting equity share capital (PUVESC) of the bank within six months from the date of final approval of the regulator. The RBI had asked the bank to cut promoter shareholding to 20 percent of paid-up capital by 31 December, 2018, and 15 percent by 31 March, 2020.

#BreakingNews | Kotak Mahindra Bank says withdrawing the writ petition filed by co in Bombay High Court pic.twitter.com/SwEQfi0PRx

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“With respect to our proposal… RBI vide its letter dated January 29, 2020 has conveyed its in-principle acceptance for promoters’ voting rights in the bank to be capped to 20 percent of PUVESC until March 31, 2020; and promoters’ shareholding in the bank to be reduced to 26 percent of PUVESC of the bank within six months from the date of final approval of the RBI,” Kotak Mahindra Bank said in a regulatory filing. Among others, it will also cap the promoters’ voting rights to 15 percent of the PUVESC from 1 April, 2020, onwards. Thereafter, the promoters will not purchase any further paid-up voting equity shares of the bank till the percentage of promoters’ shareholding reaches 15 percent of PUVESC or such higher percentage as may be permitted by the RBI from time to time, it added. [caption id=“attachment_3890333” align=“alignleft” width=“380”] Representational image. Reuters[/caption] The RBI also gave in-principle approval that the promoters will be entitled to purchase paid-up voting equity shares up to 15 percent of the PUVESC of the bank or such higher percentage as may be permitted in the future, and exercise voting rights on such shares, it said further. “Our board of directors has resolved to abide by the above. The bank is withdrawing writ petition No. 3542 of 2018 filed by it in the High Court of Bombay,” Kotak Mahindra Bank said in the filing. As on date, the promoter – Uday Kotak – and promoter group shareholding in the bank stands at 29.96 percent. Uday Kotak is the managing director & CEO of Kotak Mahindra Bank. In August 2018, it had proposed the issuance of perpetual non-cumulative preference shares (PNCPS) to cut promoter holding to 19.70 percent, which the RBI rejected. The bank then challenged the RBI’s contention in the Bombay High Court. The RBI’s bank licensing rules mandate that a private bank’s promoter will need to pare holding to 40 percent within three years, 20 percent within 10 years and to 15 percent within 15 years. In 2003, Kotak Mahindra Group’s financial arm Kotak Mahindra Finance had received banking licence from the RBI, becoming the first NBFC in India to convert into a bank. Effective April 2015, another private sector lender ING Vysya Bank was merged into Kotak Mahindra Bank. Shares of Kotak Mahindra Bank on Thursday closed 0.80 percent down at Rs 1,628.10 on the BSE.