Case of J&K Bank: Union Territory of J&K to make Union Territory of Ladakh a promoter in the bank

I had blogged on 4-Aug-21 about J&K Govt planning to increase ownership in J&K Bank.

Earlier on 30-Oct-2020, it was decided to make UT of Ladakh a promoter worth 8.23% in the bank.

Following arrangements for Jammu & Kashmir Bank Limited is hereby also made as per the provisions of the SO 339 dated 30.10.2020 issued by the General Administration Department in furtherance of recommendations of Advisory Committee on Assets & Liabilities of erstwhile State of J&K as dakhwith reference to 31.10.2019

a. J&K Bank Ltd. shall continue its operations as a going concern in both the UTs.
b. The UT of J&K shall continue to have majority shareholding in the Bank.
c. 51 % of the shareholding in the J&K Bank Ltd. shall remain with the UT of J&K. The remaining 8.23% shareholding in the J&K Bank Ltd.
(approximately 13.89% as on 31.10.2019 of the existing shareholding of the erstwhile State of Jammu & Kashmir), is hereby transferred to the UT of Ladakh.
d. One post of Director on the Board of the J&K Bank is hereby earmarked for the UT of Ladakh.
e. A reasonable proportion of employees of the J&K Bank Ltd. shall be recruited from the UT of Ladakh, details of which shall be worked out by the Bank.

Given this, On 10 Aug-21 J&K Bank sent this letter to SEBI informing of this share transfer. The Bank wanted to know whether it can tranfer the shares subject to continuation of lock-in at the hands of tranferee, which is UT of Ladakh.

SEBI in its reply on 24-Sep-21 provides more clarity on both capital infusion and this transfer. Basically, the Bank has been issuing shares to UT of J&K for this capital infusion and these shares require a lock-in period of 3 years. So, once these shares are transferred to UT Of Ladakh the question is of Lock-in period.

SEBI gives information on the laws that apply under this transfer and broadly allows the transfer but expresses some reservations.

Interesting to see how J&K Bank has become a Union Territory promoted bank with both J&K and Ladakh governments owning the bank.

 

 

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