"We will prefer reducing the stake of the promoters by going the inorganic route which may involve an acquisition," its head of group strategy Paul Parambi told PTI.
He said that acquisition was better than a stake sale to a financial investor as that creates more value for shareholders.
Parambi, however, added that the bank will not do an acquisition for the purpose of reducing the promoter share and that creating the value for the existing shareholders will be at the centre of any such move.
"Reduction in the promoter shareholding will only be a by-product in the process, not the main aim," he said while clarifying that the bank does not have any concrete deal to share right now, but will keep looking at inorganic growth opportunities.
When asked specifically for a timeline for any such acquisition to fructify, Parambi declined to comment.
It can be noted that there have been periodic reports about smaller private sector lenders like South Indian Bank, Karnataka Bank or the troubled Dhanlaxmi Bank getting acquired, but none of the reports have come true.
Sector regulator Reserve Bank has also spoken about being more accommodative when it comes to mergers and acquisitions in the banking space.
Kotak Bank, promoted by investment banker Uday Kotak, announced a 3.24 per cent dilution by a promoter group entity last Friday. The Canada Pension Plan Investment Board picked up the stake at a 3 per cent premium to the trading price.
This transaction, carried out as a bulk deal over the exchanges, will help the bank comply with the RBI diktat of reducing the promoter holding to 40 per cent by September.
Parambi said that it had been asked to further reduce the stake to 30 per cent by December 2016 and there is long time window to think of a strategy about how to achieve the target.