The Rs 500 crore preference shares issue of Kotak Mahindra Bank ran in to trouble on Tuesday after the Reserve of Bank of India (RBI) said that the bank doesn’t meet promoter holding dilution requirement.

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"RBI has today communicated to us that our perpetual non-cumulative preference shares (PNCPS) issuance does not meet their promoter holding dilution requirement. We continue to believe that we have met the requirement and will engage with the RBI in this behalf,” Kotak Mahindra Bank said in a BSE filing.

Earlier this month, Uday Kotak, the founder and promoter of Kotak Mahindra Bank, pared his stake in the bank to 19.70 percent from about 30 percent following issuance of preference shares.

The RBI had asked Uday Kotak to lower his holding in the bank to 30 percent by end-June 2017, 20 percent by end-December 2018, and to 15 percent by March 31, 2020.

The bank has "approved the allotment of 100,00,00,000 PNCPS to eligible investors at the issue price of Rs 5 per PNCPS, aggregating to Rs 500 crore pursuant to the issue.

Subsequent to this issue, the paid-up capital of the bank has increased from Rs 953.16 crore to Rs 1,453.16 crore and the promoter holding is 19.70 percent of the paid-up capital, it said.

Kotak's holding in the bank prior to the preference share issuance was 29.74 per cent.

The preference shares have been issued through private placement. The promoters' position in terms of voting rights will remain the same as earlier as banking laws cap voting rights at 15 percent, irrespective of shareholding.

Kotak had previously sold his stake in May last year. He sold 1.8 crore shares of the bank for a little over Rs 1,687 crore resulting in dilution of his stake to 29.74 percent.

First Published:Aug 14, 2018 6:12 PM IST