HEADLINES:
August 23 2019
RBI cracks down on Bandhan Bank for violating norm
29 September 2018

Bank had to cut promoters’ stake to 40% by August 22 which was not done

The Reserve Bank of India (RBI) has cracked the whip on Bandhan Bank freezing the remuneration of its MD and CEO Chandra Shekhar Ghosh for not bringing down promoters’ shareholding in the bank to 40% within three years of operations as mandated by it while granting the bank licence.

RBI had also barred the Kolkata-based lender from opening new branches. The bank has to take RBI’s prior approval for opening branches.

There is a three-layered structure for the group. Bandhan Financial Services holds 100% stake in Bandhan Financial Holdings which is the non-operative financial holding company and also the promoter of Bandhan Bank with a 82.28% stake. The bank started operations on August 23, 2015.

“RBI has communicated to us that since the bank was not able to bring down the shareholding of Non Operative Financial Holding Company (NOFHC) to 40% as required under the licensing condition, general permission to open new branches stands withdrawn and the bank can open branches with prior approval of RBI and the remuneration of the MD & CEO of the bank stands frozen at the existing level, till further notice,” the bank said in a stock exchange filing. In 2017-18, Mr. Ghosh received a remuneration of ₹2.39 crore. The bank said it was taking the necessary steps to comply with the licensing condition to bring down the shareholding of NOFHC in the bank to 40% and that it continued to engage with the RBI in this behalf.

IPO listed in March

Bandhan Bank was listed at the end of March this year following an Initial Public Offering. While Securities and Exchange Board of India (SEBI) norms ban promoters’ stake sale for one year after listing, banking industry sources said since the lender was aware of the RBI’s licensing conditions, it should have timed its IPO accordingly. Bandhan Bank has 937 branches with a loan portfolio of ₹32,590 crore and a deposit base of ₹30,703 crore as at June-end. It has a customer base of 13.65 million.

Another private sector lender, Kotak Mahindra Bank also has to reduce its promoters’ stake to 20% by the end of December and to 15% by March 2020.

 

 

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