The Reserve Bank of India (RBI) has pulled up Bandhan Bank for its failure to reduce promoter stake to 40 percent as per guidelines, withdrawing permission to open new branches automatically and stopping the remuneration of the MD and CEO until further notice, the bank informed the stock exchanges on Friday.

The RBI action came after Bandhan Bank was unable to bring down the shareholding of Non-Operative Financial Holding Company (NOFHC) to 40 percent as required under the licensing condition, the bank said, adding that it received a communication from the central bank in this regard.

"The bank is taking necessary steps to comply with the licensing condition to bring down the shareholding of NOFHC to 40 percent and shall continue to engage with RBI in this behalf," it said.

Bandhan Bank can only open branches with the prior approval of RBI now.

RBI's licensing norms require banks to bring down promoter holding to 40 percent within three years of starting operations

Promoter entity Bandhan Financial Holdings owns 82.28 percent and the public the rest in the bank, which started operations in August 2015.

Earlier, citing governing and regulatory issues, the central bank had refused to extend the terms of CEOs of Axis Bank and Yes Bank.

Meanwhile, Axis Capital believes this move by the RBI will impact Kotak Mahindra Bank (KMB) as well.

As per RBI mandate, Uday Kotak has to reduce its promoter stake in KMB to less than 20 percent from existing 30 percent. As per the mandate, it has to cut promoter holding to 20 percent of paid-up capital by 31 December 2018, and 15 percent by 31 Mar 2020. Earlier, the bank tried to reduce the promoter stake to less than 20 percent by the issuance of perpetual preference shares. RBI, however, did not approve this. Kotak Mahindra Bank continues to believe that it have met the requirement (with the PNCPS issuance) and will engage with the RBI to resolve this situation.

Axis Capital, in an investor note, said, “We feel this (RBI restricting Bandhan Bank) will have a negative bearing on Kotak Bank too wherein the promoter shareholding needs to be bought down to 20% (current 30%). The regulator seems to be in no mood to give any leeway/relaxation to any bank and may take penal actions too.”

First Published:Sept 28, 2018 5:06 PM IST