Bombay HC Refuses To Stay RBI's 31st Dec Deadline for Kotak Mahindra Bank
The Bombay High Court on Monday refused to grant a stay on the deadline given by Reserve Bank of India (RBI) to Kotak Mahindra Bank for dilution of promoter stake. The RBI had given a deadline of 31 December 2018 for diluting the promoter's stake in Kotak Mahindra Bank. With the High Court’s refusal to grant a stay, Kotak Mahindra Bank had to follow the 31st December deadline given by the central bank. 
 
Last week, Kotak Mahindra Bank had filed a writ petition against RBI to validate its position over dilution of promoter stake. In August this year, the central bank had rejected the Bank's position saying that issuance of perpetual non-convertible preference shares (PNCPS) by Kotak Mahindra Bank does not meet the dilution requirement of promoter stake.
 
In a regulatory filing, the lender had said, "We had clarified and conveyed to the RBI our position in relation to PNCPS being a part of paid up capital and the legal basis on the matter of dilution of shareholding under the Banking Regulation Act.
 
"We had also shared with the RBI the opinions of eminent jurists and senior-most legal counsels of the country which confirm our understanding. However, we have not heard from the RBI on the above matter. Given the milestone of 31 December 2018, the Bank has been left with no option but to protect its interest. By way of abundant caution, the Bank has today filed a writ petition with the Bombay High Court to validate the Bank's position."
 
Following RBI's directions, on 2 August 2018, Uday Kotak, promoter of the Bank, had sold about 1 billion PNCPS to domestic institutional investors and companies.
 
The sale, at Rs5 per share or at about Rs500 crore, helped the promoter to reduce his stake to 19.7% from 30%.
 
The next hearing in the case is scheduled for 17 January 2019.
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RBI governance structure need further examination, says board
The central board of Reserve Bank of India (RBI), which met under new Governor Shaktikanta Das on Friday, said the governance structure of the central bank needs further examination before deciding on whether it can be board-driven.
 
"The board deliberated on the governance framework of the Reserve Bank and it was decided that the matter required further examination," the RBI said in a statement. 
 
RBI's governance is a major bone of contention between the government and the bank, which led Urjit Patel to quit as RBI Governor on Monday. The government wants RBI to be driven by the board instead of the Governor, as is currently the case.
 
Under the current structure, the board has 18 directors including four Deputy Governors, four Directors from the RBI's local boards, two government nominees and others appointed by the government. Many of these appointments to the board are political. 
 
With non-technical people (non-economists) as Directors in the board of the central bank, the final word on any economic policy by the RBI is that of the Governor. However, the Central government wants the RBI Governor to be accountable to the board.
 
The board also reviewed other contentious issues like liquidity in the economy and credit in the market which soured the relationship between the government and the central bank over the past several months, with the government wanting the RBI to intervene. 
 
"The board reviewed, inter alia, the current economic situation, global and domestic challenges, matters relating to liquidity and credit delivery to the economy and issues related to currency management and financial literacy," the statement said.
 
It was the first board meeting under the chairmanship of Shaktikanta Das, who was earlier Economic Affairs Secretary in the Finance Ministry and one who steered the monetary situation in the country post-demonetisation. 
 
The draft report on Trend and Progress of Banking in India (2017-18) was also discussed at the meet, the RBI said.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

 

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SEBI Eases norms for Offer-for-share; to Include Companies with Rs1,000-crore m-cap
The Securities and Exchange Board of India (SEBI) has relaxed regulations for offer for sale (OFS) of shares through stock exchange, among other reform measures. OFS is a financial tool used to issue additional stocks in a listed company held by its promoter.
 
According to SEBI, the reviewed framework will expand the number of companies, which can avail the use of OFS mechanism.
 
"In order to expand the universe of companies to whom OFS mechanism is available, presently being top 200 companies by market capitalisation, and to bring clarity relating to the conditions laid down for cancellation of OFS...
 
"OFS mechanism shall be available for shareholders of companies with market capitalisation of Rs1,000 crore and above, with the threshold of market capitalisation computed as the average daily market capitalisation for six months prior to the month in which the OFS opens," SEBI said in a statement released after a board meeting.
 
In case of any increase or decrease in estimated issue size by more than twenty percent, fresh filing of the offer document with the board is required. At present, such requirement is for both fresh issues and offer for sale. 
 
Here are the modification in existing OFS mechanism...
 
1. Expanding the list of eligible companies
 
OFS mechanism shall be available for shareholders of companies with market capitalization of Rs1,000 crore and above, with the threshold of market capitalization computed as the average daily market capitalisation for six months prior to the month in which the OFS opens.
 
2. Cancellation of Offer
 
If the seller fails to get sufficient demand from non-retail investors at or above the floor price on T day, then the seller may choose to cancel the offer, post bidding, in full (both retail and non-retail) on T day and not proceed with offer to retail investors on T+1 day.
 
In another key decision SEBI decided to relax the regulations to list startups on stock exchanges.
 
Accordingly, the market regulator decided to rename the institutional trading platform as the innovators growth platform (IGP).
 
"In order to be eligible for listing on the IGP, the issuer shall be a company which is intensive in the use of technology, information technology, intellectual property, data analytics, bio-technology or nano-technology to provide products, services or business platforms with substantial value," the statement said.
 
As per the statement, 25% of the pre-issue capital of the issuer company for at least a period of two years shall be held by qualified institutional buyers, family trust with net-worth of more than Rs500 crore, category III foreign portfolio investor (FPI), a pooled investment fund with minimum assets under management of $150 million and registered with a financial sector regulator in the jurisdictions where it is resident.
 
Accredited investors for the purpose of IGP would include any individual with total gross income of Rs50 lakh annually and who has minimum liquid net worth of Rs5 crore or any corporate body with net worth of Rs25 crore, SEBI says.
 
SEBI board also decided to clubb investment limit of foreign portfolio investors (FPIs) on the basis of common ownership of more than 50% or common control. "However, in the case of appropriately regulated public retail funds, investment limits will not be clubbed on the basis of common control," it added.
 
The market regulator said it will carry out necessary amendments and issue circular or guidelines.
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