Kotak Mahindra Bank’s future plans could lead to a violation of Indian laws!

Kotak Mahindra Bank slipped into negative territory after the Foreign Investment Promotion Board deferred the lender’s plea to raise the foreign holding limit in the bank to 55 percent from 49 percent currently. The proposed rise has implications on Kotak's insurance businesses.

Kotak Mahindra fell 0.7 percent to 1,426 rupees after rising to 1,461 rupees in early deals. Its application for raising the overseas holding limit has failed to pass muster twice in this year. The FII stake in Kotak Bank is already at 48.6 percent after it bought out smaller rival ING Vysya Bank earlier this year.

India currently caps foreign ownership in Insurance companies at 49 percent. Parent Kotak Bank runs an insurance venture Kotak Mahindra Old Mutual Insurance, in which it controls a 74 percent share. If the foreign ownership of Kotak Bank were to exceed 51 percent then the bank will be in violation of rules governing sectoral caps in the insurance space.

(Image credit: Indiatimes)