IndusInd Bank: RBI’s new norms pave way for Hindujas to up stake

IndusInd Bank: RBI’s new norms pave way for Hindujas to up stake

Shares of IndusInd Bank rose 4% in early trade on Monday as investors welcomed the Reserve Bank of India’s recent decision to permit promoter holding of up to 26% in private sector banks.
The scrip rose to Rs 938 on the National Stock Exchange as against Rs 901.80 at previous close.
IndusInd Bank’s promoters, the Hindujas, had earlier applied to the regulator to increase their holding in the lender.

IIHL Mauritius, the Hindujas’ entity which is the promoter of IndusInd Bank, had applied to RBI to increase its holding to 26 % from the previous cap of 15 %, seeking parity after promoters of rival Kotak Mahindra Bank were given the permission to have their holding at 26 % after dragging the RBI to courts.
The RBI on Friday came out with revised guidelines on private sector banks, allowing for 26 % promoter ownership but did not go ahead with an internal working group’s recommendation to allow corporates to promote banks after protests from various quarters including former governors.
IIHL Chairman Ashok Hinduja believes that the increased promoter holding would lead to enhanced financial strength for the bank and protection for clients.

According to RBI’s current norms, the promoter of a private bank needs to pare holdings to 20% within 10 years, and to 15% within 15 years.
The RBI’s report also said there was no requirement to fix a cap on the promoters’ holding in the initial five years as the existing licensing guidelines have not mandated any cap on promoter shareholding in the first five years.

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