The lender had been asked by the RBI in August to dilute Kotak's stake in it to below 20% by December 31, following which it conducted a sale of perpetual non-convertible preference shares
Kotak Mahindra Bank has filed a writ petition with Bombay High Court seeking validation for its decision to dilute promoter Uday Kotak's stake to below 20 percent through a sale of perpetual non-convertible preference shares (PNCPS), the bank said in a statement to the exchanges.
The private sector lender had been asked by the RBI in August to dilute Kotak's stake in it to below 20 percent by the end of 2018, following which it conducted a sale of PNCPS.
Although this effectively brought down the promoter's stake to 19.70 percent of the bank's paid-up capital, questions were raised about whether the preference share issue circumvented the RBI's rules on stake dilution.
The bank decided to get its preference share issue legally validated because the RBI has not made it clear as yet about whether or not it is willing to recognise the dilution of stake achieved through the exercise.
RBI had communicated to Kotak Mahindra Bank in August that it did not recognise the manner in which it brought down Kotak's stake, prompting the lender to back its decision up with legal proof and opinions of eminent jurists and senior legal counsellors across India.
Legal experts had said that Kotak is legally right in doing so since his licence conditions require him to cut his share in the paid-up capital of the bank, and not in the number of voting shares.
However, others had argued that the intent of the RBI's rules was to ensure that a promoter's stake in a bank is brought down with respect to the number of "voting shares" he or she owns.
