The central bank placed some restrictions on Bandhan Bank Ltd's operations as one of India's youngest lenders failed to lower promoter holding within the cap prescribed by the regulator.
The Reserve Bank of India stopped Bandhan Bank from opening new branches unless it takes its approval each time, the microlender-turned-universal bank informed exchanges. The RBI also froze the remuneration to Managing Director and Chief Executive Officer Chandra Shekhar Ghosh at the current level till further notice.
Bandhan Bank was unable to bring down the shareholding of the non-operative financial holding company to 40 percent within three years of starting operations. The condition was mentioned in the RBI's February 2013 licensing guidelines. The bank was granted in-principle approval in April 2014 and began operations a few months later.
Moreover, it has to lower the holding company's stake to 20 percent within 10 years of starting the business and to 15 percent within 12 years.
Bandhan Bank is the second lender to face RBI action over promoter holding. The regulator last month rejected the tool used by the Kotak Mahindra Bank to reduce promoter Uday Kotak's stake within the RBI-mandated limits. The bank decided to issue perpetual non-cumulative preference shares to bring down his holding to 20 percent of the paid-up equity capital. Yet, the stake would have stayed at 30 percent of post-equity issue capital. The RBI has mandated Kotak to pare holding to 20 percent by December this year and 15 percent by March 2020.(Source : Bloomberg)