HDFC Bank writes to RBI, seeks approval to hold 50% stake in HDFC Life
HDFC Bank has asked the Reserve Bank of India (RBI) to choose from two options it is offering for stake holding in life insurance subsidiary HDFC Life.
The lender wants either be allowed to hold a 47.82 per cent stake HDFC Ltd in the insurer or buy additional stake in the company from the market. The second option will let the lender become compliant with norms that banks can either above 50 per cent or 30 per cent stake in a life insurance venture.
On Monday, the board of HDFC Ltd approved the merger of the corporation with and into HDFC Bank. Post the merger, HDFC Bank will be 100 per cent owned by public shareholders and existing shareholders of HDFC Limited will own 41 per cent of HDFC Bank. The closing of the transaction is expected to be achieved within eighteen months, subject to completion of regulatory approvals and other customary closing conditions.
Subject to RBI and other regulatory approvals, material subsidiaries and associate companies of HDFC Ltd will continue to be owned by HDFC Bank. This will facilitate more efficient cross selling of banking and financial services products, including insurance and mutual funds.
“The RBI rule says either you have above 50 per cent or 30 per cent and we are at 48 per cent in our life insurance subsidiary. So, we have taken up the matter with RBI and we have to get a reply sometime sooner, permitting us to keep the stake as it is or they may tell us to buy that extra stake, which we can easily buy in the market to be compliant with the banking regulation of holing 50 per cent,” said Deepak Parekh, chairman of HDFC Ltd.
He said, the bank has requested RBI for phased in approach with respect of SLR and CRR, priority sector lending as well as grandfathering of certain assets and liabilities in respect of some of its subsidiaries. These requests are under consideration by the RBI in terms of their letter to the bank date April 1, 2022.
HDFC Ltd has 47.82 per cent stake in HDFC Life, the listed life insurance subsidiary of the mortgage financier. It also has a 49.98 per cent stake in HDFC Ergo, the general insurance arm of the mortgage financier.
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