Uday Kotak led Kotak Mahindra Bank fights back RBI, drags it to Bombay High Court

Kotak Mahindra Bank Monday said it has moved the Bombay High Court against RBI's decision with respect to the bank reducing promoter holding using preference shares.

In August, Uday Kotak, the founder and promoter of Kotak Mahindra Bank, has pared down his stake in the bank to 19.70 per cent from about 30 per cent following issuance of preference shares.

Within few days, the Reserve Bank said the stake dilution by Kotak does not meet its regulatory norms on the same, something the private sector lender contested.

"We continue to believe that we have met the requirement and will engage with RBI in this behalf," Kotak Mahindra Bank informed the exchanges on Monday citing its regulatory filing made on August 14.

The bank said it has since clarified and conveyed to the RBI "our position in relation to perpetual non-cumulative preference shares (PNCPS) being a part of paid up capital and the legal basis on the matter of dilution of shareholding under the Banking Regulation Act."

Further, Kotak Mahindra Bank said it has also shared with RBI the opinions of eminent jurists and senior most legal counsels of the country which confirm its understanding.

"However, we have not heard from RBI on the above matter. Given the milestone of December 31, 2018, the bank has been left with no option but to protect its interest. 

"By way of abundant caution, the bank has today filed a writ petition with the Bombay High Court to validate the bank's position," it said in the filing made to the stock exchanges on Monday.

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Earlier, the RBI had asked promoters of the bank to bring down their stake to 20 per cent by December 2018 and 15 per cent by March 2020 in line with the guidelines for new bank licences released four years ago and then under 10 per cent later on.

Shares of Kotak Mahindra Bank were trading down 5.87 per cent down at Rs 1,207 per scrip on BSE.