RBI/2009-10/411
DBOD.No.PSBD.BC.92 /16.13.100/2009-2010
April 20, 2010
The Chief Executives of all Indian banks
in the private sector
Dear Sir/Madam,
Issue and Pricing of Shares by Private Sector Banks
Please refer to our circular DBOD.No.PSBS.BC.79 /16.13.100/2001-2002 dated March
20, 2002, in terms of which guidelines on issue and pricing of shares had been
prescribed. As per the extant instructions, all banks in private sector were
required to obtain approval of Reserve Bank of India (RBI) for issue of shares
through Initial Public Offers (IPOs) and preferential issues. Further, while the
banks were advised to follow certain prescriptions relating to pricing in
respect of Initial Public Offers (IPOs), Bonus issues and Preferential issues,
SEBI requirements in respect of Bonus issues have also been indicated.
- SEBI had introduced an additional capital raising route in May 2006 viz.
Qualified Institutional Placements (QIPs) that would enable listed companies to
raise funds from the domestic market. Consequently, many of the private sector
banks have been availing this route for raising capital. Since in terms of SEBI
Guidelines the allotments under QIP are on private placement basis, the QIP
issues have been treated as preferential issue of shares which requires RBI's
prior approval in terms of circular DBOD.No.PSBS.BC.79 /16.13.100/2001-2002
dated March 20, 2002.
- It is considered necessary to clearly spell out the approval mechanism in
respect of Qualified Institutional Placements (QIPs). Accordingly, the
guidelines in respect of issue and pricing of shares by private sector banks
have been revised to incorporate the Qualified Institutional Placements mode of
raising capital and also draw a reference to the stipulations communicated vide
our circular DBOD.No.PSBD.BC.99/16.13.100/2004-05 dated June 25, 2005 in respect
of Rights Issue. The revised guidelines are as follows:
- Initial Public Offers (lPOs):
(i) All banks should obtain RBI approval for IPOs. After listing on the stock
exchanges, banks are free to price their subsequent issues.
(ii) Issue price should be based on merchant banker's recommendation. There need
be no reference to the CCI formula for deciding on the pricing of such issues.
- Rights issues:
RBI approval would not be required for rights issues by both listed and unlisted
banks. However, banks need to comply with the requirements that have been laid
down in the circular DBOD.No.PSBD.BC.99/16.13.100/2004-05 dated June 25, 2005 on
Rights Issue.
- Bonus issues:
Private sector banks, both listed and unlisted, need not seek RBI's approval for
bonus issues. The issues would, however, be subject to SEBI's requirements on
issue of bonus shares, viz. bonus issues (a) should be made from free reserves
built out of genuine profits or share premium, (b) should not dilute the value
or rights of partly or fully convertible debentures, (c) should not be in lieu
of dividend and (d) should not be made unless all partly paid-up shares are
fully paid-up. Further, bonus issues may be issued without linkage to rights
issues.
- Preferential issue:
All preferential issues would require prior approval of RBI. Pricing of
preferential issues by listed banks may be as per SEBI formula, while for
unlisted banks the fair value may be determined by a chartered accountant or a
merchant banker.
- Qualified Institutional Placement (QIP):
Private Sector Banks need to approach RBI for prior 'in principle' approval in
case of Qualified Institutional Placements. Banks need to approach RBI along
with details of the issue once the bank’s Board approves the proposal of raising
capital through this route. Further, allotment to the investors would be subject
to compliance with SEBI guidelines on QIPs and RBI guidelines dated February 3,
2004 on acknowledgement of allotment / transfer of shares. Once the allotment
process is complete, the banks would also be required to furnish complete
details of the issue to RBI in the enclosed format for seeking post facto
approval. This would be irrespective of whether any acquisition results in
shareholding of 5% or more of the paid up capital of the bank.
- In case of pricing of issues where RBI approval is not required, pricing of
issues should be as per SEBI guidelines; in cases where prior approval of RBI is
required, pricing should take into account both SEBI and RBI guidelines.
- These instructions come into force with immediate effect and supersede the
instructions issued vide our circular DBOD.No.PSBS.BC.79 /16.13.100/2001-2002
dated March 20, 2002.
Yours faithfully,
(P. Vijaya Bhaskar)
Chief General Manager-in-Charge
Format for furnishing details of the QIBs
Format for furnishing details of the QIBs
|
Sr. No.
|
Name of the Allottees
|
No. of shares held prior to allotment
(A)
|
% of total paid-up share prior to allotment
(B)
|
No. of shares approved for allotment
(C)
|
% of shares now allotted to paid up shares
(D)
|
Aggregate no. of shares
(post issue)
(A + C)
|
% of total paid-up shares (i.e. aggregate percentage
shareholding post QIP issue)
(B + D)
|