Bandhan Bank's board approves an increase in the foreign investment limit to 49pc
New Delhi, November 4 () The Board of Directors of Bandhan Bank on Monday approved raising the foreign investment limit to 49 percent in the lender that will help reduce the participation of promoters to the desired level, the bank said.
Last week, the bank faced a rupee fine of Rs 1 of the RBI for not complying with the rules of shareholding under the licensing rules.
The board of directors of the bank at its meeting held on October 24, 2019 approved the proposal to increase the general limits of participation of the FII and FPI in the bank from the existing 24 percent to 49 percent, subject to the approval of the shareholders through a special resolution, Bandhan Bank said in a regulatory presentation.
Currently, foreign portfolio investors (FPI) and foreign institutional investors (FII) own about 13.27 percent of the registered capital with voting rights paid and aggregate foreign ownership is about 18.26 percent of the capital With the right to vote paid.
To comply with the licensing conditions for the bank according to RBI standards, the participation of the non-operating portfolio financial company (NOFHC) is required to fall to 40 percent from 60.96 percent.
The bank mentioned that the bank's NOFHC, Bandhan Financial Holdings Ltd, reduced its stake in the bank to 60.96 percent from 82.26 percent prior to the merger scheme of Gruh Finance Ltd with the private sector lender by allocating shares of capital to Gruh's shareholders.
The NOFHC requires diluting an additional 20.96 percent in the bank, which will increase public participation from 39.04 percent to 60 percent.
In view of the above provisions and have sufficient margin for the FII and FPI to hold more than 24 percent and up to 49 percent of the voting capital paid in the bank ... This would provide sufficient avenues for the NOFHC to further dilute its participation in the bank and bring it to the allowed limit of 40 percent of the bank's voting capital paid, Bandhan Bank said.
Bandhan Bank said its board of directors recommended a special resolution to increase the limits of FII and FPI participation in the bank from 24 percent to 49 percent for approval by bank members.
According to the Direct Foreign Investment policy of the Indian government, foreign investment of up to 74 percent in private sector banks is allowed, of which 49 percent is on the automatic route. More than 49 percent, approval is required.
Under FEMA 2000 and the FDI Policy, the total holdings of all FPIs and FII registered with Sebi, including its sub-accounts, cannot exceed 24 percent, however, the limit may be increased to 49 percent after approval. of the board of directors, shareholders and intimidation of the Reserve Bank.
The RBI fine to the bank was imposed by an order dated October 29, 2019, for breach of the guidelines on the ownership of promoters according to the 'Guidelines for the license of new banks in the private sector'.
In addition, the bank has been subject to certain restrictions, including the expansion of branches, for not complying with the norm of shareholding in a timely manner.
The Kolkata-based lender had started its operation on August 23, 2015, with the condition that the non-authorized non-resident share exceeds 49% until August 22, 2020. Bandhan Bank shares closed 1.45 percent at Rs 589.85 at BSE on Monday. KPM MR