|The Reserve Bank of India (RBI) has imposed a penalty of Rs 2 crore on private lender Kotak Mahindra Bank for failing to provide information about promoter shareholding in the bank and the course of action the bank was taking to dilute promoters’ shareholding as per the regulator’s norms.|
“This action 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,” the RBI said.
The RBI issued a show cause notice to the bank for failing to convey its course of action to achieve dilution of promoters’ shareholding as per the timeline set by the regulator and asked the bank why a penalty should not be imposed for “non-compliance” with the regulator’s directions.
“After considering the reply received from the bank, submissions made by the bank during personal hearing and the documents submitted by it, the RBI came to the conclusion that the bank had failed to comply with the directions issued by the RBI and decided to impose monetary penalty on the bank,” the RBI said.
Kotak Mahindra Bank and the RBI are involved in a legal tussle on the issue of dilution of promoters’ shareholding.
In December 2018, Kotak Mahindra Bank had moved a writ petition in the Bombay High Court against the RBI after the central bank did not accept the reduction of promoters’ shareholding through an issue of preference shares.
The RBI had mandated the bank to reduce its promoter shareholding to 20 per cent by December 31, 2018 and to 15 per cent by March 2022.
In August, the lender had issued perpetual non-convertible preference shares, which it said would trim promoters’ shareholding from 30.3 per cent to 19.7 per cent but the regulator did not agree with this method.