Mumbai: The Reserve Bank Friday imposed a penalty of ₹2 crore on Kotak Mahindra Bank for not complying with its directions regarding dilution of promoters' shareholding in the company.
The private sector lender was directed by RBI to furnish information about details of the shareholding held by its promoters and to submit details of the proposed course of action for complying with the permitted timeline for dilution of promoter shareholding.
"Subsequently, the bank was directed to convey its commitment to achieve the dilution as per the timelines stipulated," the RBI said.
However, Kotak Mahindra Bank failed to comply with the directions and a show cause notice was issued to the bank as to why penalty should not be imposed for non-compliance, it added.
"After considering the reply received from the bank, submissions made by the bank during the personal hearing and the documents submitted by it, RBI came to the conclusion that the bank had failed to comply with the directions issued by RBI and decided to impose monetary penalty on the bank," the central bank said while imposing a "monetary penalty of ₹20 million".
The action, RBI said, is based on the deficiencies in regulatory compliance and "is not intended" to pronounce upon the validity of any transaction or agreement entered into by the bank.
In a BSE filing Friday, Kotak Mahindra Bank said it is examining the order.
As per RBI's banking licensing norms, a private bank's promoter holding has to be brought down to 40 per cent within three years of operations, 20 per cent within 10 years and 15 per cent within 15 years.
In consonance with RBI norms, Kotak Mahindra Bank last August proposed to issue non-convertible perpetual non-cumulative preference shares to reduce promoter stake to 19.7 per cent, worth ₹500 crore at ₹5 apiece, which the RBI shot down arguing that preference shares do not comprise core equity and help promoters retain voting rights.
As a result, the tussle went to Bombay High Court and the matter is still pending with the court.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.
