Kotak Mahindra Bank's move to raise up to Rs 500 crore by issuing preference shares on a private placement basis will meet the Reserve Bank of India (RBI) requirements of reduction of control, says Sandeep Parekh, founder of Finsec Law Advisors.

"This happens to be not a regular preference share but a perpetual preference share which will never be redeemed and it seems to be much closer to equity," said Parekh.

In a bid to lower promoter stake to 20 percent as per Reserve Bank of India (RBI) norms, Kotak Mahindra Bank on Thursday issued non-convertible perpetual non-cumulative preference shares worth Rs 500 crores.

The move will not bring down control of promoter group, Parekh said.

“The only catch here would be to look at the fine print in terms of how much of control is going because RBI would like to look at that,” he added.

On RBI’s likely position if it is a non-voting share, Parekh said the votes are not going down then RBI may have an issue with it because it is not with respect to increasing networth which would qualify for but with respect to change of control.