RBI allows private banks' promoters to hold 26% in banks; these banks will benefit the most

by Devanshi Asher

The Reserve Bank of India (RBI) has allowed promoters of private banks to hold 26 per cent stake in the banks triggered movement in many banking stocks on Monday. Here is a Zee Business report on banks, which will benefit from this move and what this means for the stocks.  

The RBI on Friday accepted most of the recommendations of its internal working group on corporate ownership of private sector banks. The banking regulator has allowed unrestrained promoter shareholding in the first five years of operations. Initially, it was allowed up to 40 per cent. 

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After the completion of five years and before the completion of 15 years (within next 10 years), the promoters will have to bring down the shareholding to 26 per cent. 

This move was long awaited by banks such as Kotak Mahindra Bank and IndusInd Bank.  The Central Bank accepted 21 recommendations out of 33 and is reviewing others.   

The banks which are likely to benefit from this are 

1. IndusInd Bank, where promoter holding is around 15.2 per cent can increase stake up to 26 per cent. 
2. DCB Bank, where the promoter holding is up to 15 per cent can also increase promoter holding up to 26 per cent. 
3. Axis Bank, where promoter holding is at 11.6 per cent. 
4. Kotak Mahindra Bank has promoter holding at 26 pr cent. 
5. HDFC Bank has promoter holding at 25.83 per cent. 
6. HDFC Limited has promoter holding of 19 per cent.   

Banks with over 26 per cent promoter holding: 

1. Bandhan Bank has promoter holding at 40 per cent. 
2. CSB Bank has promoter holding at 50 per cent. 

It was earlier believed that promoters of both Bandhan Bank and CSB Bank may have to dilute their stakes significantly.  

This was one of the reasons why the stocks of these banks have been feeling a lot of pressure. This is now a positive news. 

Banks have been seeking more time from the RBY for divesting their stakes in them.  

The RBI constituted the working group on June 12, 2020, and the panel submitted the report on November 20, 2020, inviting comments of stakeholders and members of the public by January 15, 2021, a PTI report said. 

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Another key change is promoters will have to bring in more money to begin a bank as the RBI has accepted all the recommendations on the minimum initial capital requirement for licensing new banks, saying for universal banks the initial paid-up voting equity share capital/ networth required for a new bank, may be increased to Rs 1,000 crore from present Rs 500 crore; for SFBs to Rs 300 crore from Rs 200 crore and for UCBs transiting to SFBs to Rs 150 crore from Rs 100 crore and the same has to be upped to Rs 300 crore in five years from Rs 200 crore, this report said. 

 (Disclaimer: The views/suggestions/advices expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)