RBI frees Bandhan Bank from ‘bondage’, ban from MD & CEO

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There is good news for the promoters of Bandhan Bank and its investors. The Reserve Bank of India is removing the restrictions on promoters of Bandhan Bank.

There is good news for the promoters of Bandhan Bank and its investors. The Reserve Bank of India (RBI) is removing restrictions on promoters of Bandhan Bank. Now the Reserve Bank has lifted the restriction on the remuneration of Chandrashekhar Ghosh, Managing Director and Chief Executive Officer (MD & CEO) of Bandhan Bank. According to Bandhan Bank, the prohibition on the remuneration of Chandrashekhar Ghosh has been lifted by the promoters on fulfilling RBI’s terms and conditions regarding their participation in the bank. Bandhan Financial Holdings Limited (BFHL), the holding company of Bandhan Bank, fulfilled the RBI conditions by selling 20.95 per cent stake on August 3, worth Rs 10,550 crore. Earlier, in February 2020, Bandhan Bank had been approved by the Reserve Bank to open new branches.

What were the restrictions on Bandhan Bank?

In fact, the RBI imposed two restrictions on Bandhan Bank on 19 September 2018. The first restriction was that Bandhan Bank cannot open new branches, if it has to open new branches, first RBI approval has to be taken. The second ban was the ban on the remuneration of Ghosh, MD & CEO of the bank. The RBI lifted the ban on opening of new branches on Bandhan Bank on 25 February 2020 with certain conditions. RBI directed the bank that out of the total banking outlets to be opened by the bank in a financial year, 25% should be opened in rural areas where banking facilities are not available. In this way, the condition of getting the approval of RBI before Bandhan Bank opened a new branch was over.

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Promoters fulfilled by selling stake

Bandhan Financial Holdings Limited, the holding company of Bandhan Bank, sold its 20.95% stake in the bank on August 3, 2020 to meet the RBI conditions, which is valued at Rs 10,550 crore. BHFL has sold more than 33.73 crore shares in the secondary market. BFHL has to bring its stake in the bank to 40% of paid-up voting capital. Hence the holding company sold the shares it held on August 3 to reduce its stake in the bank.

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