LIC gets RBI nod to increase stake in Kotak Mahindra Bank

Last week, the RBI accepted a working group's recommendation to increase promoter stake in private banks till 26 percent and non-promoter stake to 10 percent.

As of September 30, the LIC holds 4.96 percent stake in Kotak Mahindra Bank. Promoters Uday Kotak and family holds 26 percent stake in Kotak Mahindra Bank while Canada Pension Plan Investment Board holds 6.37 percent. In 2020, Kotak moved court against the RBI’s direction to reduce promoter stake to 15 percent. The RBI later agreed to allow Kotak to retain stake at 26 percent.

On November 26, the RBI accepted 21 out of the 33 recommendations submitted by a Central bank working group on ownership and corporate structure for Indian private sector banks.

Among the recommendations accepted is a rule that says the cap on promoters’ stake in the long run of 15 years may be raised from the current levels of 15 percent to 26 percent of the paid-up voting equity share capital of the bank.

This stipulation should be uniform for all types of promoters and would not mean that promoters, who have already diluted their holdings to below 26 percent, will not be permitted to raise it to 26 percent of the paid-up voting equity share capital of the bank, the RBI said.

'Central banks, sovereigns globally have one medicine for all problems: print money', says Uday Kotak

"The promoter, if he/she so desires, can choose to bring down holding to even below 26 percent, any time after the lock-in period of five years," the RBI said.

The Central bank, on November 20, released a report on the internal working group (IWG) recommendations on private bank ownership and corporate structure