Bandhan Bank Barred From Opening New Branches, Paying CEO's Remuneration

The Reserve Bank of India (RBI) has put restrictions on Bandhan Bank, barring it from opening new branches or paying remuneration to its CEO, Chandra Shekhar Ghosh until further notice as it was unable to lower the promoter holding as per the prescribed cap.

India's youngest bank in an exchange filing said, "RBI has communicated to us that since the Bank was not able to bring down the shareholding of Non Operative Financial Holding Company (NOFHC) to 40 percent as required under the licensing condition, general permission to open new branches stands withdrawn and the Bank can open branches with prior approval of RBI and the remuneration of the MD & CEO of the Bank stands frozen at the existing level, till further notice.

The Bank is taking necessary steps to comply with the licensing condition to bring down the shareholding of NOFHC in the Bank to 40 percent and shall continue to engage with RBI in this behalf."

Bandhan Bank did not bring down the shareholding of the NOFHC to 40 percent within three years of starting its operations. RBI's February 2013 licensing guidelines mention these conditions. Further, it will have to lower the holding company's stake in the bank to 20 percent within 10 years of commencement of the business and to 15 percent within 12 years. Bandhan Bank got an in-principle approval in April 2014 and started operations after a few months.

The Kolkata-based private lender is the second bank after Kotak Mahindra Bank to be grappled with RBI's direction to reduce promoter holding. Last month the RBI rejected the tool that Kotak Mahindra used to reduce promoter Uday Kotak's stake in order to fulfill RBI-mandated limits.