RBI lifts restriction on branch expansion of Bandhan Bank

India’s banking regulator has lifted a restriction it placed in September 2018 under which Bandhan Bank would have to seek its approval before opening any new branch.

The restriction was put in place after the company failed to comply with a rule that requires banks to reduce their promoter shareholding to 40% or less within three years of starting operation.

Bandhan Bank was started in August 2015.

However, as of September 2018, the promoter — Bandhan Financial Holdings Ltd — still held over 82% of the bank’s equity.

Reserve Bank of India had also frozen the remuneration to the bank’s MD and CEO at the then levels.

Since then, the bank’s promoter has reduced its shareholding to just around 60%.

“Reserve Bank of India, vide its letter dated February 25, 2020, has informed that though the Bank is still not in compliance with the licensing condition on dilution, considering the efforts made by the Bank to comply with the said licensing condition, it has lifted the regulatory restriction on branch opening, subject to the condition that the Bank ensures that atleast 25 % of the total number of ‘Banking Outlets’ opened during a financial year are opened in unbanked rural centres,” Bandhan Bank said today.

The bank did not mention if the restriction placed on the CEO’s salary was also lifted.

Private sector banks in India are required to reduce the shareholding of their promoters to 20% within 10 years and 15% in another 2 years.

Bandhan Bank was earlier a microfinance lender, and received an in-principle approval to become a regular bank in 2014.

It had 938 branches when the restriction was put in place, and had plans to hit 1,000 branches in the same year.

Another private sector bank, Kotak Mahindra Bank, also failed to bring down promoter shareholding according to the norms.