INSUBCONTINENT EXCLUSIVE:
Bandhan Bank shares plunged to their lowest since March debut on Monday after the central bank withdrew permission to open new branches and
froze chief executive's salary, as the banking regulator tightens its grip over the country's crisis-hit financial sector.The Reserve
Bank of India (RBI) clamped down on the lender, majority owned by Bandhan Financial Holdings, a so-called non-banking financial company
(NBFC), for failing to bring down its main shareholder's stake to below 40 per cent.The country's financial sector is under scrutiny
after a series of defaults by one of the biggest non-banking financial firms in the sector raised fears of a credit crunch that roiled
financial markets in the past week.The RBI is becoming stricter which is good for the banking system, else later it may become a bigger
scam, said AK Prabhakar, head of research at IDBI Capital in Mumbai."Initially, things may go haywire as people cannot digest too much of
regulation," he said.Late last month, the RBI curtailed Yes Bank CEO Rana Kapoor's term, without giving a reason
The move, according to market insiders, exemplifies the central bank's increasingly assertive approach in tackling the bad debt problem
plaguing India's banking sector.The country's banks have seen a surge in soured loans that hit a record $150 billion at the end of March
and stricter rules enforced by the RBI are expected to have pushed the industry's non-performing loans even higher."Wherever RBI has seen
divergence, they demanded management to change, for example, Axis Bank," Mr Prabhakar said.In April, Axis Bank, riddled with bad loans, said
its long-time chief executive Shikha Sharma would step down, days after the central bank was reported to have expressed concerns about the
lender giving her a three-year extension."I believe the RBI is doing the right thing
If they would have done this long back, we could have had a better banking regulation and system," analyst Mr Prabhakar said.Bandhan Bank
