The RBI has allowed LIC to hike its stake in Kotak Mahindra Bank to up to 9.99% from the current 4.96%. Kotak Mahindra Bank’s shares rose 3% following the announcement.
The RBI’s permission comes in the wake of the central bank finalising new norms on ownership of private banks where it clarified that non-promoters would be allowed to hold up to 10% for individuals and non-financial institutions. Analysts feel that this is an enabling provision to ensure that the insurance giant is not in breach of norms.
The RBI requires prior permission before investors buy more than 5% stake in a bank. At current levels, LIC was very close to the 5% limit. In an exchange filing, Kotak Mahindra Bank said that it has received an intimation from LIC of the approval, which is valid for a year.