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Hindujas seek nod to raise holding in IndusInd Bank to 26%

We have written to the RBI to increase shareholding to 26%. Stronger the promoter, more committed he will be, says Hinduja.

, ET Bureau|
Last Updated: Mar 17, 2020, 08.47 AM IST
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The RBI’s bank licensing rules stipulate that a private bank’s promoter needs to pare its holding to 40% within three years, 20% within 10 years and to 15% within 15 years.
Mumbai: The Hindujas have asked the Reserve Bank of India that they be allowed to raise their stake in private sector lender IndusInd Bank to 26% from the mandated 15%, citing the relaxation granted to Uday Kotak recently. The letter was sent by IndusInd International Holding Ltd, the promoting entity. Founded by London-based Hinduja brothers, IndusInd got a banking licence in 1994.

“We have just recently written to the RBI to increase shareholding from 15% to 26%,” said Ashok Hinduja, chairman of the Hinduja Group of Companies (India). “When I saw that Kotak Mahindra Bank has got a dispensation, we also thought of writing to them. Why not give us that dispensation as well? Let’s see how they respond.”

The RBI’s bank licensing rules stipulate that a private bank’s promoter needs to pare its holding to 40% within three years, 20% within 10 years and to 15% within 15 years. This has been relaxed for Kotak Mahindra Bank and Bandhan Bank.

“My message to the regulator is that, when the original licences were given, promoters could hold more, about 40-49%. The stronger the promoter, the more committed he will be — more capital will be infused by the promoter in the bank. He is more committed to the entity and the bank will be stronger,” Hinduja said. “But if you are dependent on the market, then when the crisis hits, these people will sell and exit, because these are financial investors.”

In the wake of the troubles faced by Yes Bank, the IndusInd stock has fallen nearly 61% in the past year and is at its lowest in three years over asset quality concerns regarding the corporate book. It ended Monday at ?664 on the BSE, down 17.5%.

“I think this is the right opportunity for us to support the bank, though it does not need capital for two years,” Hinduja said. “It is always better to come in when the prices are down.”

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‘Voting Rights Not So Important’

The RBI allowed Uday Kotak, the promoter of Kotak Mahindra Bank, to hold a 26% stake as long as the bank didn’t raise capital from a share sale to outsiders or on a rights basis. His voting rights have been restricted to 15% of the capital starting April 2020.

Following this, the central bank also lifted the freeze on Bandhan Bank’s branch banking expansion and the salary of its chief executive officer, Chandra Shekhar Ghosh, also its founder. This had been imposed as he hadn’t diluted his stake in line with the rules. The bank’s promoter entity Bandhan Financial Holdings owns more than 60% of the bank. Bandhan got its banking licence in 2015, Kotak in 2003.

“Voting rights is not so important. They can say you will have the economic benefit but you won’t have the voting right,” Hinduja said. “Banks are anyway tightly regulated by the RBI, so higher voting right does not make much sense. Promoter needs to pass RBI’s fit and proper rule. Shareholding after a certain point can’t be increased without RBI’s express permission, so the fear of voting rights is overdone.”

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