Anand Mahindra no longer a promoter of Kotak Mahindra Bank

Anand Mahindra, vice-chairman and managing director of Kotak Mahindra Bank has told the bank that he does not wish to continue as the promoter of the bank. The board has also approved his request to cease as a promoter. He will continue to be on the board as a non-executive director. Normally, one would wonder why this happened. But in this case, Kotak Mahindra Bank has said that Mr Mahindra’s stake –3.68% including entities controlled by him- will now be reclassified as non-promoter holding.

The promoter shareholding will come down from 52.39% to 48.71%. What does this achieve? According to the banking license issued to Kotak Mahindra Bank, the promoter’s stake in the bank should not be more than 49%. By this current arrangement, the bank will meet this stipulation. One can argue whether the RBI’s stipulation is a reasonable one in a free-market era. A promoter gets better control by having a simple majority too. But there surely could have been better ways of meeting the license condition than rearranging the promoter’s stake.