September 28, 2018 / 4:00 PM / 2 months ago

India central bank clamps down on Bandhan Bank over owner's stake

MUMBAI, Sept 28 (Reuters) - India’s Bandhan Bank Ltd said on Friday the central bank had withdrawn its “general permission” to open new branches and frozen its chief executive’s salary for failing to bring down its main shareholder’s stake to below 40 percent.

The bank is majority owned by Bandhan Financial Holdings Ltd, a so-called non-banking financial company (NBFC) that does not take deposits. Bandhan Financial Holdings has an 82.28 percent stake in the bank.

The NBFC sector is in trouble after a series of defaults by one of the biggest names in the sector raised fears of a credit crunch that roiled India’s financial markets in the past week.

The turmoil in domestic bonds, stocks and the rupee prompted the Reserve Bank of India (RBI), the country’s market regulator and the Finance Ministry to intervene with assurances.

Bandhan Bank said it was taking necessary steps to comply with the licensing condition to bring down its main shareholder's stake to 40 percent. (bit.ly/2xRhzZW)

“The bank can open branches with prior approval of RBI and the remuneration of the managing director and CEO of the Bank stands frozen at the existing level, till further notice,” the lender said in a statement.

Kolkata-based Bandhan Bank is a former micro lender, which was one of two companies that won bank permits from the Reserve Bank of India in 2014.

It is known for its low-cost model and high margins. According to its website, the bank has 937 branches across India.

Shares in Bandhan closed down 0.9 percent on Friday.

Reporting by Abhirup Roy Editing by Edmund Blair

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