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The Bombay High Court has today Uphold the Reserve Bank of India (RBI’s) order against the Kotak Mahindra Bank, in which the promoters of the bank have to dilute their stake in the bank by December 31 as the deadline.
The private sector bank, which issued perpetual non-convertible preference shares, moved to the Bombay High Court after the central bank issued an order against the bank stating that the issuance of shares did not meet the RBI’s promoter holding dilution requirements.
The senior advocate representing the Kotak Mahindra Bank, Darius Khambata said: “The bank has issued preference shares to dilute the promoter stake. The RBI must not take any coercive step post-December 31, the deadline by when the promoters have to reduce their stake to 20%.”
Khambata argued, “After the RBI rejected the formula applied by us in August, we wrote two letters to them in October, one to the governor of the RBI and subsequently to its board, but we haven’t got any response.”
Counsellor for Kotak Bank also said that “We are the only private sector bank owned by an Indian. If we go by the RBI mandate then it will be difficult to find any domestic investor and hence the only option would be to bring in foreign investors.”
Venkatesh Dhond, senior counsel appearing for the RBI, counter-argued that every bank has complied with the promoter shareholding dilution requirement.
