RBI gives HDFC Bank particular regulatory support post HDFC combination
The Reserve Bank of India permitted HDFC Bank Ltd and Housing Growth Finance Corporation select regulatory relief to smooth out the merger between the two companies, set for completion by July this year. The central bank has permitted the bank to meet priority sector lending requirements in a staggered fashion over three years, the bank said in an exchange notification. These requirements, which include lending to weaker segments of the economy, are linked to an organization's loan book.
However, post the merger, HDFC Bank will need to comply with requirements to hold a certain level of cash reserve ratio, statutory liquidity ratio and liquidity coverage ratio on the entire merged balance sheet, right from the beginning. HDFC Bank also said that investments including subsidiaries and associates of HDFC Limited are allowed to continue as investments of HDFC Bank. The RBI has permitted HDFC Bank or HDFC Limited to increase the shareholding to more than 50% in HDFC Life Insurance Company Limited and HDFC ERGO General Insurance Company Limited prior to the effective date.
Further, the RBI has permitted HDFC Bank to continue holding HDFC Limited’s stake in (a) HDFC Education and Development Services Private Limited, engaged in operating three education schools, for a period of two years from the Effective Date; (b) HDFC Credila Financial Services Limited, subject to the shareholding being brought down to 10% within two years from the Effective Date and not onboarding new customers. Earlier this week, Reuters reported that the bank and the housing financier had raised adequate liquidity to meet these requirements from the start.
