Uday Kotak, executive vice chairman and managing director of Kotak Mahindra Bank
Uday Kotak, executive vice chairman and managing director of Kotak Mahindra Bank

The relaxation in norms for private sector banks have resulted in a staggering windfall gain of Rs 23,300 crore to Uday Kotak, says financial analyst Hemendra Hazari.

This major relaxation given to only one bank, Kotak Mahindra Bank, has seriously undermined the credibility of the Reserve Bank of India, Hazari said in a blog.

In a surprise capitulation, the RBI had relaxed the rules for the ceiling on percentage of shares held by the founders of private banks.

Hazari claimed that RBI has carved out this exception for just one bank, Kotak Mahindra Bank, whose founders have been allowed to reduce their stake to 26% from 30% at present within six months of the final RBI approval. To date, this has resulted in a staggering gain of $3.3 billion or Rs 23,300 crore to the founders of Kotak Mahindra Bank or essentially, Uday Kotak, Hazari said.

Thereafter, no date has been set by the banking regulator for the stake to be reduced to 15%.

Hazari said that in contrast, the RBI took action against Bandhan Bank in September 2018 when the founders did not reduce their stake, restricting the bank's business by not allowing opening of new branches.

As part of the settlement with the regulator, Kotak Mahindra Bank will withdraw its case against the RBI, Hazari said.

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