Stake dilution: Bandhan Bank awaits RBI response on deadline extension

Bandhan Bank, which completed three years of operations on Thursday, is still awaiting feedback from the Reserve Bank of India (RBI) on its request for an extension of deadline to meet the promoter shareholding norms. 

“We are awaiting the RBI’s guidelines on meeting shareholding norms,” Chandra Shekhar Ghosh, managing director and chief executive officer, told reporters on the sidelines of the third anniversary celebration function of the bank in Kolkata on Thursday. 

While the Securities and Exchange Board of India’s (Sebi’s) rules call for a year’s lock-in period for promoter holding after listing, the RBI’s norms require promoters’ stake to be brought down to 40 per cent within three years of the launch of operations of a bank. 

Bandhan Bank went for an initial public offering (IPO) in March this year, which, sources said, constrains the bank from reducing promoters’ shareholding. After the IPO, promoters’ holding in Bandhan Bank came down to 82.28 per cent, from 89.62 per cent. 
 

It is understood that among the various options that Bandhan Bank was looking at to meet the shareholding norms, are merging the three entities — Bandhan Financial Services (BFSL), Bandhan Financial Holding (BFHL), and Bandhan Bank — which would bring down the promoters’ holding to  close to 40 per cent. Ghosh refused to comment on the matter.

Y V Reddy, former governor of the RBI and the chief guest at the function, said there should be a clear policy on promoter shareholding norms of new banks. At the helm of the three-layered ownership structure at Bandhan Bank is BFSL, a non-banking finance company (NBFC), which had a promoter holding of 40.73 per cent, according to data available in March 2018. 

The promoter holding was held by two trusts — Financial Inclusion Trust at 32.91 per cent, and North East Financial Inclusion Trust at 7.82 per cent. In 2009, when Bandhan converted from a non-government organisation to an NBFC, the latter entity had issued the shares to the two trusts. 

On April 9, 2014, the RBI granted in-principle approval to BFSL for setting up a bank in the private sector.  Subsequently, BFSL and Bandhan Bank entered into a business transfer agreement to transfer all of BFSL’s existing microfinance business, including, all the assets, liabilities, accumulated profits, and its entire infrastructure along with its consumer base to the bank. 

After the in-principle approval, and in accordance with the RBI New Bank Licensing Guidelines, BFHL was set up to act as a non-operating financial holding company of the bank.  BFHL obtained registration as a non-banking financial institution without accepting public deposits from the RBI on June 4, 2015. BFHL acts as the promoting company for Bandhan Bank, with a promoters’ shareholding of 82.28 per cent after the IPO. 

If the three entities — BFSL, BFHL, and Bandhan Bank — are merged, the promoter holding would be close to 40.73 per cent, which will help the bank meet regulatory guidelines, according to analysts. 

Its non-performing assets are one of the lowest in the industry.