RBI lifts curbs on GIC-backed Bandhan Bank to open branches, but adds riders
Photo Credit: Reuters

The Reserve Bank of India has lifted restrictions on Bandhan Bank, allowing it to open new branches without prior permission, the lender informed the stock exchanges.

The central bank lifted the ban on the condition that the Kolkata-based private bank must open at least 25% of its banking outlets in unbanked areas.

“Considering the efforts made by the bank to comply with the said licensing condition, RBI has lifted the regulatory restriction on branch opening,” Bandhan Bank said in a regulatory filing.

In September 2018, RBI had barred the GIC-backed Bandhan Bank from opening new branches without its prior approval after the private-sector lender failed to meet a key licensing condition.

The central bank had also frozen the salary of managing director and CEO Chandra Shekhar Ghosh at the existing level. RBI’s decision had come after Bandhan Bank had failed to bring down the shareholding of its non-operative financial holding company to 40%.

According to RBI's new bank licensing norms, promoters of private lenders are required to dilute their shareholding to 40% within three years of commencing business, 20% in 10 years and 15% in 15 years.

Bandhan Bank was one of two lenders to get a banking license from the RBI in 2014; IDFC Bank was the other. It launched its operations in August 2015.

Helped by the merger with Gruh Finance in 2019, Bandhan Financial Holdings Ltd have brought down their promoter shareholding in the bank to 60.96% as on December end 2019 from 82.28% stake in Bandhan Bank at the end of June 2018.

The bank has HDFC (Housing Development Finance Corporation), Singapore sovereign wealth fund GIC Pte Ltd and International Finance Corporation, the private-sector investment arm of the World Bank, among its shareholders.

The microlender-turned-bank went public in March 2018 after an initial public offering (IPO) that was subscribed nearly 15 times. It made a spectacular debut on the stock markets, with its shares gaining 27% higher on the first day.

Earlier this month, RBI agreed to give billionaire Uday Kotak more time to cut his stake in Kotak Mahindra Bank even as the central bank decided to cap his voting rights to 20%.

A long-pending dispute over promoter shareholding was brought to an end with an agreement where Uday Kotak will now have to cut his stake in Kotak Mahindra Bank by only 4% over the next six months, as against the 15% that the regulator wanted him to reduce by March.

The voting rights will then drop overnight to 15% even if his actual shareholding is higher. The banking regulator has also added clauses to the agreement to meet true conditions.

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