ICICI Bank to cut stakes in Fed Bank, SIB

Move a fallout of new RBI norms

ICICI Bank will cut its holdings in Federal Bank and South Indian Bank (SIB) following the Reserve Bank of India's (RBI) proposal to bring down the maximum holding of an entity or a group in a private bank to 10 per cent. ICICI Bank holds 20.44 per cent stake in Federal Bank and and 11.8 per cent stake in South Indian Bank.

ICICI Bank deputy managing director, Kalpana Morparia, said the bank views its holding in Federal and South Indian Bank as a mere financial investment.

"If we are required to cut our stake in Federal Bank, we will do so," she said. The bank is contemplating on multiple options to pare its stake in the banks over two to three years, she added.

Morparia said the Reserve Bank's proposed norms will have no impact on ICICI Bank as its shareholder base is diversified.

Similarly, Rabo will not be asked to cut its stake in Yes Bank, which is likely to be set up soon, as it is a widely held listed entity.

Commenting on the draft, a Reserve Bank of India official said, "The central bank has laid the path for the future. However, the means to achieve the path is negotiable."

The central bank has sought suggestions on the draft policy framework for ownership and governance of private banks. Based on the feedback it will place a second draft of the policy in public domain for further debate, the official added.

Development Credit Bank (DCB) chief financial officer Yogesh Chadda, said the RBI move is in the right direction. However, the proposal needs to be implemented in phases over a period of time.

Centurion Bank managing director Shailendra Bhandari said its premature to jump to conclusions as the RBI has invited comments and will issue a second draft prior to the final guidelines.

Even within the draft policy, the RBI has stated that where any existing shareholding by any individual entity or group of related entities is in excess of 10 per cent, the bank will be required to indicate a time table for reduction of holding to the permissible level. This, Bhandari said, should give some respite to bankers.