Kotak Mahindra takes RBI to court

In the second such incident in India's banking history, private sector Kotak Mahindra bank took the Reserve Bank of India to court after the latter restricted it from diluting promoter holding using preference shares.

Uday Kotak had been asked by the RBI to lower his holding in the bank to 20% by the end of this year, and to 15% by March 31, 2020.

In August, Uday Kotak, the head of Kotak Mahindra Bank, had proposed to reduce promoter's holding in the bank by selling preferential shares.

Preference shares are treated as part of the core equity shares used to dilute promoters’ stakes. The proposal was shot down by the RBI.

On Monday, the bank informed the stock exchanges that it has filed a writ petition in the Bombay high court against this. It said it had once again explained its position to the RBI but is yet to hear back from the regulator.

“We have since clarified and conveyed to the RBI our position in relation to PNCPS (preference shares) being a part of paid-up capital and the legal basis on the matter of dilution of shareholding under the Banking Regulation Act. We have also shared with the RBI the opinions of eminent jurists and senior most legal counsels of the country, which confirm our understanding,” the bank said.

The bank, however, said that it has since not heard from the RBI and that it had been left with no other option than to file a writ petition.