The Reserve Bank of India (RBI) has barred Bandhan Bank from opening new branches without its approval and ordered the bank to freeze the salary of its chief executive Chandra Shekhar Ghosh over its failure to meet shareholding rules, Bandhan informed the stock exchanges on 28 September 2018.
“RBI has communicated to us that since the bank was not able to bring down the shareholding of Non Operative Financial Holding Company to 40% as required under the licensing condition, general permission to open new branches stands withdrawn and the bank can open branches with prior approval of RBI and the remuneration of the MD and CEO of the bank stands frozen at the existing level, till further notice,” the bank said in a notification to BSE.
According to RBI’s new bank licencing guidelines, the bank’s promoter, Bandhan Financial Holdings Ltd, has to reduce its stake from 82% to 40% within three years of commencing the business. The deadline for Bandhan Bank was on 23 August. Thereafter, banks are required to reduce their shareholding to 20% and 15% within 10 years and 12 years, respectively. The bank has assured that it was taking the necessary steps to comply with the licence condition on shareholding.
The RBI had granted a five-year extension to Uday Kotak, vice-chairman and managing director of Kotak Bank, over the original deadline of 31 March 2015. As per RBI’s rules, the bank had to lower the promoter holding to less than 20% by December 2018 and 15% by March 2020. Kotak currently holds a 30.03% stake in the bank. Bandhan Bank Ltd fell 0.96% to close at ₹564 per share on 28 September 2018 on the BSE, while the benchmark index, Sensex lost 0.27% to close at 36227.14 points.