RBI bars Bandhan Bank from opening branches

The RBI on Friday pulled up Bandhan Bank for its failure to bring down the promoter holding to 40 per cent, as mandated in the licensing norms for universal banks. The promoter holding in the bank at present is 82.28 per cent.

 

The central bank also barred the bank from opening new branches and put a freeze on the remuneration of Bandhan Bank MD and CEO Chandra Shekhar Ghosh.

In a stock market communication on Friday, Bandhan Bank said: “RBI has communicated to us that since the bank was not able to bring down the shareholding of Non-Operative Financial Holding Company to 40 per cent...general permission to open new branches stands withdrawn. The bank can open branches with the prior approval of the RBI. The remuneration of the MD & CEO stands frozen at the existing level till further notice.”

Ghosh declined to comment on the development.

Taking steps, says bank

However, the release said the bank is “taking necessary steps” to comply with the licensing condition and “shall continue to engage with RBI” in this regard.

As per licensing norms, the promoter holding should be brought down to 40 per cent within three years of starting operations.

Bandhan graduated from a microfinance institution to a bank in August 2015. So, ideally, it should have scaled down the promoter’s holding by August 2018.

It went for the IPO in March this year, when the promoter’s stake was reduced from 89.62 per cent to the current level.

During the third anniversary celebrations last month, Ghosh reiterated that the bank was in “constant discussions” with the RBI regarding the shareholding norms. According to information available on the Bandhan website, it has 937 branches and 2,764 doorstep service centres. As on June 30, its capital adequacy ratio stood at 32.61 per cent.

“It may be difficult for Bandhan to bring down its promoter holding to 40 per cent overnight, as their valuations are pretty high. So they may require some extension in timeline to be able to comply,” said a banking analyst on conditions of anonymity.

The bank’s scrip closed at ₹564, down 0.96 per cent, on the BSE on Friday.