Kotak Bank dips as RBI rejects proposal for promoter holding dilution

The Reserve Bank of India has refused to let Uday Kotak to dilute promoter shareholding in Kotak Mahindra Bank through the non-convertible perpetual non-cumulative preference share (PNCPS) route.

The central bank felt that the proposal was against the basic principle of diversified ownership and control of financial institutions. The Executive Vice-Chairman and Managing Director of Kotak Bank, who is also the principal founder and promoter of the bank had sought to lower his stake to 20 per cent by selling PNCPS to a group of investors in the first week of August. By this move he aimed to dilute promoter stake by issuing preference shares instead of common equity, which irked the RBI.

Kotak Mahindra Bank informed that exchanges that RBI has rejected the bank PNCPS issuance as it did not meet the regulators promoter holding dilution requirement. The bank believes it has met the requirement and will continue to engage with the RBI on this matter, said a filing to the exchange.

Earlier on August 1, 2018, Kotak Mahindra Bank proposed to issue non-convertible PNCPS of face value Rs. 5 each. According to RBI's guidelines, the bank is required to reduce promoter shareholding to 20 per cent of paid up capital by the end of calendar year 2018 and to 15 per cent by end of March 2020.

In Thursday's early morning session, the stock of Kotak Mahindra Bank was trading down at Rs. 1,256.65 per share, down by 2.71 per cent at 10:34 hours.