Non-compliance: Bandhan Bank barred from opening new branches

By: | Updated: September 29, 2018 5:26 AM

RBI has asked Bandhan Bank to stop opening new branches while also freezing chief executive officer Chandra Shekhar Ghosh’s salary.

Chandra Shekhar Ghosh, bandhan bank, banking sector, banking industryChandra Shekhar Ghosh

In the second instance of regulatory action against a private bank promoter for not complying with shareholding norms, the RBI has asked Bandhan Bank to stop opening new branches while also freezing chief executive officer Chandra Shekhar Ghosh’s salary.

Earlier this year, the RBI had rejected Kotak Mahindra Bank founder Uday Kotak’s bid to bring down his personal holding in the bank to under 20% by issuing perpetual non-cumulative preference shares.
In a notification to the exchanges, Kolkata-based Bandhan Bank said, “Since the bank was not able to bring down the shareholding of non-operative financial holding company to 40% as required under the licensing condition, general permission to open new branches stands withdrawn and the bank can open branches with prior approval of RBI, and the remuneration of the MD & CEO stands frozen at the existing level, till further notice.”

The bank said it is taking necessary steps to comply with the licensing condition to bring down the shareholding of the holding company in the bank as per the regulatory and shall continue to engage with the RBI in this behalf.

According to the RBI’s guidelines for licensing new banks in the private sector, when a non-bank financial company (NBFC) launches a private bank through an NOFHC, it shall initially hold a minimum of 40% of the paid-up voting equity capital of the bank, which shall be locked in for a period of five years and which shall be brought down to 15% within 12 years. At the end of June 2018, Bandhan Financial Holdings held an 82.28% stake in the bank. Bandhan Bank was listed on the exchanges on March 27, 2018.

The bank’s shares ended 0.96% lower than their previous close at `564 on the BSE on Friday. The notification to the stock exchanges was made after the close of trading hours.

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