The Reserve Bank of India (RBI) imposed a penalty of Rs 2 crore on Kotak Mahindra Bank for compliance with the central bank's directions regarding disclosures on dilution of the promoters' shareholding in the company.

RBI had directed the public sector bank to furnish information on shareholding held by its promoters and to submit details of the proposed course of action for complying with the permitted timeline for dilution of promoter shareholding.

"Subsequently, the bank was directed to convey its commitment to achieve the dilution as per the timelines stipulated," the central bank said.

Kotak Mahindra Bank failed to comply with these directions and a show cause notice was issued to the bank as to why penalty should not be imposed for non-compliance, it added.

RBI, further said, that after consideration of the reply received from the bank, it concluded that the bank has failed to comply with its directions and decided to impose a "monetary penalty of Rs 20 million".

The action, RBI said, is based on the deficiencies in regulatory compliance and "is not intended" to pronounce upon the validity of any transaction or agreement entered into by the bank.

RBI's banking licensing norms require a private bank's promoter holding to be brought down to 40 percent within three years of operations, 20 percent within 10 years and 15 percent within 15 years.

To comply with the regulations, in August 2018, Kotak Mahindra Bank proposed to issue non-convertible perpetual non-cumulative preference shares worth Rs 500 crore at Rs 5 apiece to reduce promoter stake to 19.7 percent. It was, however, shot down by the RBI arguing that preference shares do not comprise core equity and help promoters retain voting rights.

The case was dragged to the Bombay High Court, where the matter remains unsolved.