Why Banks have Zero Promoter Holding?

Ever looked at a bank’s shareholding pattern and wondered, Wait… why is promoter’s holding = 0%. What if I tell you, this is a whole strategic move, not a mistake, not a typo, not a hidden thing. Strange right? You must be wondering, "Why?"
Well, you're not the only fish in this pond; many others have the same question. So, let’s unfold the secrets behind 'why banks have zero promoter holding?'.

What Even is Zero Promoter Holding?

In normal companies, a Promoter is the OG- the owner, the founder or a group with significant power in the company. They are the ones who usually hold majority shares, call the shots and have the real long-term control over the company.

Promoter holding = the percentage of shares held by the key insiders.

But in banks… There's no one with the tag of ‘I own this bank!’ because promoters in banks = zero. This is not only common, it’s by design. And now the question arises, why?

Role of RBI & SEBI

There is no doubt that the Reserve Bank of India has controlled the functioning of banks, and their having lower to zero promoters’ holdings is all thanks to this apex bank.

Along with the RBI, SEBI also plays an indirect role in banks having zero promoter holdings.

• Regulatory Framework: RBI & SEBI

Both the Reserve Bank of India and the Securities Exchange Board of India don’t want promoter-dominated banks, and thus require them to dilute their promoters’ holdings gradually.

1. RBI requires promoters to gradually reduce their stake.
2. SEBI removes the “promoter” label once control is diluted and the bank is professionally managed.

Example: “Bandhan Bank” listed on NSE & BSE in December 2018, brought down its promoter shareholdings from 82.28% to 39.98% as of now to comply with RBI’s regulatory requirements.

• Public Interest > Private Interests

Banks are like the national infrastructure. You keep your deposits with banks. Companies take loans from them, and the economy runs on them. So, there’s no way a single person or a group is going to lead this circus.
Allowing one person or entity to control a bank creates risks of favouritism, corruption, or worse, collapse due to reckless decisions. Banks must act as neutral financial intermediaries, not some personal playgrounds.
So far, we have got one thing crystal clear:

“RBI and SEBI regulate and limit the shareholding structure of banks”, but now the question arises, “If neither RBI nor SEBI mandates banks to have a zero promoter shareholding, then why do they still have it?”

Here’s the answer to this question

• Voluntary Classification to a “NO PROMOTER” Structure

Some banks voluntarily classify their promoters as public or institutional shareholders. This move is often taken to improve corporate governance and appear more professionally managed.
Example:

1. ICICI Ltd (original promoter of ICICI Bank) was reclassified as a public shareholder.
2. UTI/LIC/GIC (original promoters of Axis Bank) were reclassified as institutional investors.

• Compliance with RBI’s Licensing Guidelines

RBI doesn’t say “you must have zero promoter holding,” but it does require dilution of promoter holding over time.
For private banks, promoter holdings must be brought down to 26% within 15 years. But sometimes banks go a step further and bring their promoters’ shareholdings to zero. They do so to,

1. Simplify ownership
2. Avoid RBI’s control-and-ownership scrutiny
3. Position themselves as professionally run entities

For Example, Kotak Mahindra Bank, when it got its banking license in 2003, Uday Kotak held nearly 49% promoter stake. But over the years, to comply with the RBI's licensing guidelines, the stake was gradually reduced. Today, as of 2025, the promoter holding stands at just 25.88%, aligning exactly with RBI’s mandated cap of 26% for private banks.
Note: Previously, this 26% limit was 15%. This is why many banks have 15% or less promoter holdings. For example, IndusInd Bank with 15.83%, DCB Bank with 14.7%.

• SEBI-friendly move for Institutional investments

SEBI norms require minimum public shareholding (25%), but not zero promoter holding. However, institutional investors prefer companies with broad-based, professional ownership.
Banks may deliberately adopt a no-promoter model to:
Attract Global Institutional Capital
Get included in certain Indices like Nifty 50 & Sensex or Global ETFs

• Symbol of Governance Maturity

A bank with no promoter is often seen as:

1. Free from Promoter Influence
2. Run by an Independent Board and Professionally Managed.
3. This helps in building investor confidence, especially for large-cap banks.

Major Example:

HDFC Bank
The biggest private bank in India had HDFC Ltd as its promoter with a 25.52% stake. But post the HDFC-HDFC Bank merger in July 2023, it too became a no-promoter entity.
So, who owns HDFC Bank now?
Post-merger, the ownership is widely spread across public shareholders, including mutual funds, foreign institutional investors, LIC, and retail investors. No single entity holds controlling power.
And what about other HDFC group companies?
While HDFC Ltd. no longer exists separately, some HDFC group companies like HDFC Life, HDFC ERGO, and HDFC AMC still hold minor stakes, but none qualify as promoters.
So yeah, there’s no rulebook forcing banks to drop promoter holdings to zero, but clearly, strategy is louder than regulation here.

You can watch our detailed video for full insights.

What about Public Sector Banks (PSBs)?

When it comes to public sector banks, the story flips. Unlike private banks striving for zero promoter holding, PSBs are largely owned and controlled by the Government of India, with a majority stake (usually 51% or more).
Now the main thing is, even though the Government has high holdings in banks, it is not considered a promoter by SEBI.
It’s like: I own it, but I am not the promoter. I am just... Supervising from the back.

Also check: How to Check E-Mandate in HDFC Bank?

Conclusion:

At the heart of it, banks don’t drop promoter holdings because they’re forced to. They do it to look better, run cleaner, and attract smarter money. It’s not just a regulatory move, it’s a strategic upgrade. Zero promoter holding in banks isn’t a loophole. It’s a leadership choice. A choice to stand tall, stay clean, and be trusted by investors, regulators, and the public alike.