Kotak Mahindra Bank shares recovered initial losses to move higher on Monday after the Reserve Bank of India (RBI) raised the permissible promoter holding in private banks to up to 26 percent from 15 percent. The move came as part of the 21 of 33 recommendations by an internal working group approved by the banking regulator last week.

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At 11:50 am, the Kotak Mahindra Bank stock was up two percent at Rs 2,001.6, having slid as much as 1.3 percent to Rs 1,936.8 apiece earlier in the day.

Kotak Mahindra Bank's promoter group held a 26 percent stake in the lender at the end of the September quarter. Eminent banker Uday Kotak's stake stood at 25.76 percent.

Uday Kotak, after a long run-in with the RBI over his shareholding in Kotak Bank, had sold a 2.83 per cent stake, worth over Rs 6,800 crore, in the private sector lender last year. That brought down his stake in the lender to the RBI-mandated 26 percent.

The RBI's move is widely expected to benefit lenders such as Kotak Mahindra Bank, which have been seeking more time from the central bank to divest its stake.

The RBI constituted the working group on June 12, 2020, which submitted its report on November 20, 2020, inviting comments of stakeholders and members of the public by January 15, 2021.

The regulator also accepted the recommendation that no changes be made to the extant instructions related to the initial lock-in requirement of holding a minimum 40 percent of the paid-up voting equity share capital of the bank for the first five years. It, however, stated no cap on promoter holding during the period.

The report favours the continuation of the 40 percent minimum holding for the first five years to ensure that promoters maintain their skin in the game and also to ensure credibility of the control of the promoter group till the business is properly established and stabilised.

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First Published:Nov 29, 2021 12:30 PM IST