Kotak Bank Gets RBI Nod To Cap Voting Rights, Sell Stake

Private sector lender Kotak Mahindra Bank has informed stock exchanges that the Reserve Bank of India (RBI) has given its final approval to the bank’s proposal on stake reduction in the bank and capping the promoters’ voting rights.

According to RBI rules, the bank was mandated to reduce promoter shareholding to 20% by December 31, 2018, and to 15% by March 2020. This rule has been relaxed by the RBI.

Promoters led by Managing Director and CEO Uday Kotak owned 29.96% of the share capital on December 2019.

However, promoters’ voting rights will stand curtailed. The RBI said that promoters would have 20% of the paid-up voting equity share capital until March 31, 2020, and it would be brought down to 15% from April 1, 2020.

The RBI said that after the stake reduction, promoters would not purchase any further paid-up voting equity shares of the bank till the percentage of their shareholding reached 15% of the bank or such higher percentage as might be permitted by the RBI in future.

The RBI further said the promoters would be entitled to purchase additional shares of the bank’s equity capital up to 15% or such higher percentage as might be permitted in the future, and exercise voting rights on such shares.

The private sector bank had informed stock exchanges that it had withdrawn a writ petition filed in the Bombay High Court against the regulator on January 30.

In December 2018, the bank had moved a petition in the high court against the RBI after the central bank did not accept the reduction of promoter shareholding through an issue of preference shares.

According to RBI norms, a bank needs to bring down its promoter shareholding to 40% in the first three years after starting operations. Thereafter, the bank needs to bring down its promoter shareholding to 20% in 10 years and 15% in 15 years.