Kotak Mahindra Bank Takes RBI to Court over Dilution of Promoter Stake
Moneylife Digital Team 10 December 2018
Kotak Mahindra Bank Ltd, on Monday, had filed a writ petition against Reserve Bank of India (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 said, "We have 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 have 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 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%.
 
At 12.13pm on Monday, Kotak Mahindra Bank was trading 6.10% down at Rs1,204 on the Bombay Stock Exchange (BSE), while the 30-share benchmark Sensex was down 1.41% at 35,169.
 
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Shailesh Gaikwad
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