RBI lifts curbs on Bandhan Bank CEO's pay package after promoter cuts stake

A man leaves an automated teller machine (ATM) facility of Bandhan Bank in Kolkata
The Reserve Bank of India (RBI) has lifted the restrictions imposed on the remuneration of private lender Bandhan Bank’s managing director and chief executive officer (MD&CEO) – Chandra Shekhar Ghosh, after the bank's promoter, Bandhan Financial Holdings, reduced its stake in the bank to 40 per cent by offloading 21 per cent stake earlier this month, to meet the regulator’s ownership norms.

The private lender, in a statement to the exchanges, said that the RBI vide its communication dated August 17, 2020 lifted the other regulatory restriction "the remuneration of the MD & CEO of the bank stands frozen, at the existing level".
“All the regulatory restrictions imposed by the RBI vide letter dated September 19, 2018, on the bank are now withdrawn’, the bank further said.

RBI had imposed two restrictions on the bank in September 2018. It was required to take prior approval from the regulator for opening of any new banking outlets and the remuneration of the MD&CEO of the bank was frozen, at the current level, as the bank’s promoters failed to comply with licensing requirements of reducing their stake in the bank.

Ghosh took home a salary of Rs 2.10 crore for the financial year 2019-20, according to the bank's annual report. Since the RBI had frozen the remuneration of the MD&CEO at the existing level, no increments or performance linked incentives were paid to him during FY20.

According to RBI’s licensing norms, any bank offering ‘universal’ services needs to bring down the promoter’s stake to 40 per cent in three years from the date of commencement of operations. In 2018, when Bandhan Bank got listed, the promoter stake stood at 82.3 per cent. Since then, the bank had been exploring various options to dilute the promoter stake to meet the RBI requirement. After it failed to lower its promoter stake in due course of time, the central bank imposed restrictions on it.

The central bank had lifted restrictions on branch opening in February this year, after taking into account the progress in the dilution of excess shareholding of the bank's promoter.

Earlier this month, the promoter - Bandhan Financial Holdings (BFHL) - sold nearly 337.4 million shares at a minimum of Rs 311 apiece to raise Rs 10,500 crore. The stake sale was done through multiple block deals on the stock exchange platform.

After the stake sale, the promoter’s stake has come down to 40 per cent from 60.96 per cent.

The holding company is looking to get into the insurance and mutual fund business, with the proceeds of the stake sale, subject to the regulator’s approval. The board of the holding company will either decide to start a business or give dividend, or do both. Ghosh had said that in order to get into the insurance business, the company could pick up a stake in a company.
Shares of the private lender closed 0.31 per cent lower at Rs 287.30, on the BSE.


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