Bandhan Financial Holdings, the holding company of Bandhan Bank, has brought down its stake in the lender to 40 percent from around 61 percent through a block trade, Chandra Shekhar Ghosh, Managing Director and CEO of the bank told Moneycontrol. The holding company sold the stake worth around Rs 10,500 crore in the bank.
Under RBI norms, Bandhan promoter had to bring down the stake to 40 percent in the first stage. Bandhan Financial Holdings had 60.95 percent in the bank before the transaction.
“We have been informed that Bandhan Financial Holding has sold part of its stake in the bank. The stake is now down to 40 per cent,” said Ghosh. Under current RBI rules, Bandhan need not reduce promoter stake further for another three years, Ghosh said. “After three years, the bank can further reduce stake by another 20 percent if rules require,” he said.
Ghosh and his family members together have around 2 per cent stake in the holding company.
Insurance, mutual funds business next?
Ghosh said there are two ideas behind the stake sale by Bandhan Financial Holding. First, to comply with the RBI norms and second to focus on future businesses. These businesses can operate like subsidiaries under the holding company.
“Under the RBI norms, the bank cannot engage in other businesses. The holding company can use this money (raised from share sale) to pursue businesses like insurance and mutual funds. They will take a call and plan the future strategy,” said Ghosh.
Earlier, Bandhan was also considering merging the bank with the holding company to reduce the promoter stake to comply with RBI norms. Ghosh said in the backdrop of the share sale by promoters, a merger may not be necessary now.
Bandhan Bank’s promoter holding was actually 82 percent before the acquisition of GRUH Finance last year.
In September 2018, RBI imposed punitive actions on Bandhan Bank. This included withdrawing permission to open branches and freezing the remuneration of the Managing Director and CEO of the bank at the existing level until further notice. However later, in February, the RBI allowed the bank to open branches without its approval but with a rider that at least a quarter of the branches should be opened in unbanked rural areas in a year.
This relaxation was given after RBI noted that it is impressed with the bank’s efforts to comply with the licensing rules.
RBI has been insisting that promoters of private banks should keep an arm’s length with the banks they founded. The regulator has had a court battle with Kotak Mahindra Bank (KMB) promoter, Uday Kotak before agreeing for an out of the court settlement.
The RBI let the promoters, Uday Kotak and family, retain 26 percent stake but capped the voting rights at 15 percent by April. KMB withdrew the case subsequently and some interpreted this as a win for Uday Kotak. In June, Kotak sold 5.6 crore shares for more than Rs 6,900 crore in a block deal, bringing down his stake to 26.1 percent, inching closer to the RBI’s stipulated level.
IndusInd Bank promoters, Hindujas, are also in dialogues with the RBI on promoter holding issue.
Ghosh said business environment has been improving reflecting in improved collections post the lockdown. About a quarter of Bandhan’s loan book is still under moratorium. Out of its total customer base of 20.31 million, 15.46 million are micro banking customers. Out of the total loan book of Rs 74,300 crores, Rs 47,500 crore or around 64 percent is microloans. This includes individual loan portfolio amounting to Rs 2,200 crore.
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