RBI Permits HDFC Bank Group to Increase Stake in IndusInd Bank to 9.5%
The Reserve Bank of India (RBI) has granted approval to the HDFC Bank Group to raise its aggregate holding in IndusInd Bank to 9.5% of the bank's paid-up share capital or voting rights. This decision, communicated in a letter dated February 5, 2024, follows an application submitted by the HDFC Bank Group.
The approval is subject to several conditions. The HDFC Bank Group must comply with the relevant provisions of the Banking Regulation Act, 1949, and RBI's Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies, dated January 16, 2023. Compliance with the Foreign Exchange Management Act, 1999, regulations issued by the Securities and Exchange Board of India (SEBI), and any other applicable statutes, regulations, and guidelines is also required.
According to the filing, HDFC Bank Group must acquire major shareholding within one year from February 5, 2024, or the approval will be cancelled. The group must also ensure that its holding in IndusInd Bank does not exceed 9.50% of the paid-up share capital or voting rights of the bank at any time. Furthermore, if the aggregate holding of HDFC Bank falls below 5%, prior approval from the RBI will be needed to increase it back to 5% or more.
HDFC Bank clarified that the stake acquisition in IndusInd Bank is designated for the HDFC Group, not specifically for HDFC Bank. HDFC Bank has no intention to invest in IndusInd because existing shareholding by other group entities is likely to exceed the prescribed limit of 5%. The application for an increase in investment limits was made on behalf of the group entities, in the normal course of business. The approval, valid for one year until December 14, 2026, allows for aggregate investments by entities like HDFC Mutual Fund and HDFC Life. The bank sought this increase as combined group investments were projected to exceed the previous 5% limit.
In related news, on January 25, 2024, the RBI also allowed the Life Insurance Corporation of India (LIC) to acquire up to a 9.99% stake in HDFC Bank Ltd. LIC has been advised by the RBI to acquire the major shareholding in the Bank within one year, i.e., by January 24, 2025 and must ensure that the aggregate holding in the Bank does not exceed 9.99% of the paid-up share capital or voting rights of the Bank at all times.
The Reserve Bank of India has also approved HDFC Bank Group's acquisition of up to 9.50 per cent holdings in Yes Bank, Axis Bank, ICICI Bank, Suryoday Small Finance Bank, and Bandhan Bank. The approval to acquire the stakes is intended for investments by HDFC Asset Management Company (AMC), HDFC Ergo, and HDFC Life Insurance.
