The Bandhan Bank board on Monday approved increasing foreign investment limit to 49 per cent in the lender that will help bring down promoter shareholding to the desired level, the bank said.
The bank last week faced a Rs 1 crore fine from the RBI for not complying with shareholding norms under the licensing rules.
"The board of directors of the bank at its meeting held on October 24, 2019 had approved the proposal for increase in the overall shareholding limits of the FIIs and FPIs in the bank from the extant 24 per cent to 49 per cent, subject to approval of shareholders by way of a special resolution," Bandhan Bank said in a regulatory filing.
Currently, foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) hold around 13.27 per cent of paid-up voting equity capital and the aggregate foreign holding is around 18.26 per cent of paid-up voting equity capital.
To be compliant with the licensing conditions for the bank as per the RBI norms, the shareholding of non-operative financial holding company (NOFHC) is required to come down to 40 per cent from 60.96 per cent.
The bank mentioned that the NOFHC of the bank, Bandhan Financial Holdings Ltd , trimmed its holding in the bank to 60.96 per cent from 82.26 per cent earlier post the scheme of amalgamation of Gruh Finance Ltd with the private sector lender through allotment of equity share to the shareholders of Gruh.
The NOFHC requires to dilute an additional 20.96 per cent in the bank which will increase public shareholding from 39.04 per cent to 60 per cent.
"In view of the above provisions and to have sufficient headroom for the FIIs and FPIs to hold beyond 24 per cent and up to 49 per cent of the paid-up voting equity capital in the bank,...This would provide sufficient avenues for the NOFHC to further dilute its shareholding in the bank and bring it to the permitted limit of 40 per cent of the paid-up voting equity capital of the bank," Bandhan Bank said.
Bandhan Bank said its board of directors has recommended a special resolution to increase the shareholding limits of the FIIs and FPIs in the bank from 24 per cent to 49 per cent for approval by the members of the bank.
As per the Foreign Direct Investment policy of the Indian government, foreign investment up to 74 per cent is permitted in private sector bank of which 49 per cent comes under automatic route. Beyond 49 per cent, an approval is required.
Under FEMA 2000 and FDI Policy, the total holdings of all FPIs and FIIs registered with the Sebi, including their sub-accounts cannot exceed 24 per cent, however, the limit can be increased to 49 per cent after approval by the board of directors, shareholders and intimation to the Reserve Bank.
The RBI fine on the bank was imposed by an order dated October 29, 2019, for non-compliance with the guidelines on promoter holding as per the 'Guidelines for Licensing of New Banks in Private Sector'.
Also, the bank has been put under certain restrictions including branch expansion for not complying with the shareholding norm timely.
The Kolkata-headquartered lender had commenced its operation on August 23, 2015, with the condition that the permissible non-resident shareholding shall not exceed 49 per cent till August 22, 2020.
Bandhan Bank shares closed 1.45 per cent down at Rs 589.85 on BSE on Monday.