Shares of Kotak Mahindra Bank rallied 5 percent in the early trade on Friday after it decided to cap the promoters' voting rights to 15 percent from April 1 onwards, ending its long ongoing feud with the Reserve Bank of India (RBI) over promoter shareholding.

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The scrip gained 5.64 percent and touched intraday high of Rs 1,720 apiece on the BSE.

The private lender on Thursday said it has decided to cap the promoters' voting rights to 15 percent from April 1 onwards. The RBI accepted promoters' voting rights to be capped at 20 percent till March.

The RBI gave its in-principle acceptance for reducing promoters' shareholding to 26 percent of the paid-up voting equity share capital of the bank within six months from the date of final approval of the regulator, it said.

In a regulatory filing, the Uday Kotak led bank also said that it has decided to withdraw the case filed in Bombay High Court after RBI rejected its proposal to issue perpetual non-convertible preference shares to comply with rules concerning promoter shareholding.

UBS said that it was a positive development as uncertainty over the promoter stake is removed.

The brokerage maintained a ‘Neutral’ rating on the stock with a target of Rs 1,750 per share. However, it expects a limited upside as it feels that the stock already trades at premium valuations.

Nomura also believes that the issue of promoter’s shareholdings being settled is a near-term positive for the stock and it settles pending litigation with the regulator without any operational repercussions.

It maintained a ‘Neutral’ call with a target at Rs 1,600 per share.

The bank had moved the court on December 10, 2018, challenging an RBI directive of August 13, 2018, which had directed it to dilute the promoter's shareholding from around 30 percent to a maximum of 20 percent of its paid-up voting equity capital by December 31, 2018, and to 15 percent by March 31, 2020.

At 9:40 am, shares of Kotak Mahindra Bank traded 4.51 percent higher at Rs 1.701.45 on the BSE.