New Delhi: Shares of Kotak Mahindra Bank rose 4% on Friday after the Reserve Bank of India gave Uday Kotak more time to cut his stake in the lender, even as the regulator decided to cap his voting rights, ending a decade-long dispute over promoter shareholding.

The stock rose to 1693.80, while the benchmark Sensex was flat at 40,905.57 points. Bankex was up nearly 1%.

As part of the agreement, Uday Kotak will now have to cut his stake in Kotak Mahindra Bank by only 4% worth 12,500 crore over the next six months, against the 15% that the regulator wanted him to reduce by March, but the Reserve Bank will cap his voting rights—first at 20% till 31 March, which will then drop overnight to 15% even if his actual shareholding is higher. The banking regulator has also added clauses to the agreement to ensure Kotak adheres to the formula.

In a notice to stock exchanges on Thursday, Kotak Mahindra Bank said the RBI has agreed to its proposal to reduce the promoter stake from the current 29.96% to 26% over the next six months. It also said the promoter voting rights will be capped at 20% of the paid-up voting share capital until 31 March and will be further capped at 15% from 1 April onwards. Kotak Mahindra Bank added that promoters will not purchase any further “paid-up voting equity shares" of the bank till promoter shareholding reaches 15%.

The bank has also decided to withdraw its writ petition against RBI from the Bombay High Court.

The tussle had started in 2008 when RBI wrote to the private lender, seeking details of Kotak’s plans to reduce his stake to maintain higher industry standards. On 8 June, 2019, RBI imposed a penalty of 2 crore on the bank for non-adherence to guidelines.

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