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Bandhan Bank loses 20% as RBI freezes new branch openings over shareholding norms

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“The bank is taking necessary steps to comply with the licensing condition to bring down the shareholding of Non-Operative Financial Holding Company (NOFHC) to 40 percent and shall continue to engage with RBI in this behalf,” it said.

Bandhan Bank loses 20% as RBI freezes new branch openings over shareholding norms
India's newest Bank, Bandhan Bank, lost nearly a fifth of its value as trade opened on Monday after the Reserve Bank of India (RBI) cancelled it's plans of opening new branches and froze remuneration of its MD and CEO Chandra Shekhar Ghosh over shareholding norm violations.
The share price of Bandhan Bank was trading at Rs 453, down Rs 111 or 20 percent at 9.19 am on BSE on Monday.
The RBI on Friday said instructed Bandhan bank to stop opening any new branches without its approval and imposed the restrictions for failure to bring down promoter stake to 40 percent as per guidelines.
“The bank is taking necessary steps to comply with the licensing condition to bring down the shareholding of Non-Operative Financial Holding Company (NOFHC) to 40 percent and shall continue to engage with RBI in this behalf,” it said.
RBI’s licensing norms required banks to bring down promoter holding to 40 percent within 3 years of starting operations. Bandhan bank started operations as a universal bank in August 2015. Bandhan Bank, in its response to the RBI said it is taking necessary steps to bring down non operative financial holding company stake to 40 percent.
Promoter entity, Bandhan Financial Holdings currently owns 82.28 percent in the bank.
Earlier, citing governing and regulatory issues, the central bank had refused to extend the terms of CEOs of Axis Bank and Yes Bank.
Kotak Mahindra Bank, too, lost nearly 7 percent of its value on the BSE as investors anticipate a "Bandhan Bank" kind of an action from RBI.
As per RBI mandate, Uday Kotak has to reduce its promoter stake in KMB to less than 20 percent from existing 30 percent. As per the mandate, it has to cut promoter holding to 20 percent of paid-up capital by 31 December 2018, and 15 percent by 31 Mar 2020. Earlier, the bank tried to reduce the promoter stake to less than 20 percent by the issuance of perpetual preference shares. RBI, however, did not approve this. Kotak Mahindra Bank continues to believe that it have met the requirement (with the PNCPS issuance) and will engage with the RBI to resolve this situation.
Axis Capital, in an investor note last week, said, “We feel this (RBI restricting Bandhan Bank) will have a negative bearing on Kotak Bank too wherein the promoter shareholding needs to be bought down to 20% (current 30%). The regulator seems to be in no mood to give any leeway/relaxation to any bank and may take penal actions too.”

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