Tag: RBI norms

The recent Reserve Bank of India clarification on banks’ promoter holdings is likely to benefit IndusInd Bank, if the central bank does not have any issues related to the promoters, Emkay Global said in a report.

In IndusInd Bank, the Hinduja brothers hold a 16.5 percent stake. The increase in promoter stake will boost the bank’s financial strength, and their clients will be protected.

The RBI had recently clarified that the promoters who have recently reduced their holdings to below 26% and want to increase it back, can approach the central bank. The promoter will have a choice to bring down the promoter holding to below 26% after the initial locking period is over.

The RBI retained the norm to maintain a minimum (floor) of 40% of paid-up voting equity share capital by the promoter for the first five years, but there is no cap on the promoters’ holdings in the initial five years, Emkay highlighted. That said, the cap on the promoter’s stake over 15 years has been raised from 15% to 26%, which was implemented in the case of Kotak Mahindra Bank.

Non-promoter shareholding will be capped at 10% of the paid-up voting equity share capital of the bank for natural persons and non-financial institutions and at 15% for all categories of financial institutions, supranational institutions, public sector undertaking or government. If this is allowed, then possibly HDFC may not had to bring its stake in Bandhan to 10%, Emkay said.

In the case of invoking pledged shares of a bank, the pledgee’s voting rights will be restricted to 5% till the time the pledgee obtains permission from the RBI for the regularisation of the acquisition of these shares.

The RBI has retained non-operative financial holding company (NOFHC) as the preferred structure for all new licences to be issued for universal b anks, but it will be mandatory only in cases where the individual promoters, promoting entities or converting entities have other group entities, the report said. However, banks currently under NOFHC, such as IDFC First Bank and Bandhan Bank, may be allowed to exit such a structure if they do not have any other group entities in their fold.

The RBI has given in-principle approval to IDFC First Bank-Bandhan Bank, but IDFC will have to first divest stake in its MF/tech businesses for a reverse merger with IDFC First Bank, while Bandhan Bank is not keen on diluting the structure as of now, the report said.

Furthermore, on the relaxation of the listing norms for future small finance banks (SFBs), existing SFBs in queue, including Utkarsh, Fincare, Jana, ESAF, and even the recently-formed Unity SFB, may not get any relief. However, Unity SFB, which is a venture between BharatPe and Centrum, could have different terms, given the potential acquisition of beleaguered PMC Bank.

Small finance banks can now list within eight years from the date of commencement of operations against the earlier condition of within three years of reaching a net worth of Rs 5 billion, and against the demand for 10 years. For universal banks, the listing requirement remains the same, that is after six years of commencement of operations.