Why Bandhan Bank share rallied 19% in four days?

Shares of private sector lender Bandhan Bank jumped nearly 5 per cent on Monday, notching a month high on Bombay Stock Exchange, after the Reserve Bank of India (RBI) allowed the bank to open new branches.

What happened?

In the last four trading session, shares of the Kolkata-based lender surged 19 per cent from Rs 468.90 on December 11, as the bank's founder and CEO Chandra Shekhar Ghosh said the bank would add another 40 branches by December 31, taking the total number to 978.

Extending its gaining streak, shares of the bank gained as much as 4.67 per cent to touch an intra-day high of Rs 558.00 apiece on the Bombay Stock Exchange, after opening marginally higher at Rs 534.30 against previous closing of Rs 533.10.

In a similar trend, stocks of the lender were trading at Rs 554.80, up 3.93 per cent on the National Stock Exchange.

Now what

Bandhan Bank opened five branches on December 12, and plans 40 more before the end of this month.

The Reserve Bank of India had earlier imposed restrictions on Bandhan Bank's branch expansion, after it failed to pare promoters' stake to 40 percent from close to 82 percent, within the stipulated three-year time frame.

Last week, the bank received an exemption from the Securities and Exchange Board of India with respect to lock-in of one year on the equity shares held by the promoter and eligibility condition of one year from listing, in order to comply with the requirements of RBI licensing guidelines.

Also Read:SEBI exempts Bandhan Bank from 1 year lock-in on promoter shares

As per RBI's licensing norms, the promoters of the bank were supposed to cut their holding to 40 per cent within three years of starting operations.

Bandhan Bank, which started operations in August 2015, should have ideally brought down the promoter holding by August 2018.

Edited by Chitranjan Kumar