In a bid to dispel any confusion, HDFC Bank clarified on February 6 that the recent Reserve Bank of India (RBI) approval for acquiring a stake in IndusInd Bank is not directed at HDFC Bank itself. The clarification emphasized that the term ‘Bank’ in the disclosure should be understood as referring to the HDFC Bank Group.
The approval granted by RBI pertains specifically to investments by HDFC Bank’s Asset Management Company (AMC) and Life Insurance divisions. As a promoter of these entities, HDFC Bank was required to seek approvals from the RBI for these transactions, as stated in a report by CNBC-Awaaz.
IndusInd Bank had informed stock exchanges on Monday evening that the RBI has permitted HDFC Bank to acquire an “aggregate holding of up to 9.50 percent of the paid-up share capital or voting rights” in the bank. The approval, effective for one year, is subject to compliance with various regulatory provisions, including the Banking Regulation Act, 1949, RBI’s Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies dated January 16, 2023, FEMA, Sebi regulations, and other applicable laws.
The clarification by HDFC Bank underscores that the approval is not for HDFC Bank itself but for its AMC and Life Insurance divisions. The distinction is crucial as the bank sought to prevent any misinterpretation in the market regarding its intentions.
The approval comes amid the backdrop of the shareholding pattern of IndusInd Bank, where promoters IndusInd International Holdings Ltd and IndusInd Ltd collectively hold 16.45 percent stake. Mutual funds own a combined 15.63 percent stake, while insurance companies, including LIC, hold a 7.04 percent stake. Foreign portfolio investors collectively hold a substantial 38.24 percent stake as of the December quarter in 2023.
As per the terms of the RBI approval, if HDFC Bank fails to complete the share acquisition within the stipulated one-year period, the approval will be revoked. This development adds an intriguing dimension to the dynamics of stake acquisitions in the banking sector, sparking further interest among market observers and stakeholders alike.