HDFC Bank Gets RBI Approval to Boost Investments in Kotak Mahindra, AU Small Finance Banks

HDFC Bank Gets RBI Approval to Boost Investments in Kotak Mahindra, AU Small Finance Banks

Mumbai: HDFC Bank has received approval from the Reserve Bank of India (RBI) for its group entities to increase investments in Kotak Mahindra Bank, AU Small Finance Bank, and Capital Small Finance Bank up to 9.5% of their share capital.

In a letter dated January 3, RBI granted permission to HDFC Bank, the promoter and sponsor of its group entities, including affiliates like HDFC Mutual Fund, HDFC Life Insurance, HDFC ERGO General Insurance, and HDFC Pension Fund Management among others.

HDFC Bank clarified that while it has no intention to directly invest in these banks, the "aggregate holding" of its group entities is likely to exceed the 5% prescribed limit, compelling the bank to apply for approval from RBI on September 20, 2024.

According to sources, the investments made by HDFC Bank's group entities form part of their regular business activities. Notably, HDFC Mutual Fund and HDFC Life Insurance have substantial investment portfolios in assets under management (AUM) worth over Rs 7.7 lakh crore and close to Rs 3 lakh crore, respectively.

HDFC Bank's largest holding book primarily comprises government bonds amounting to Rs 1.7 lakh crore.

According to the market regulator SEBI, investors must obtain prior approval from RBI before increasing their stake in banks beyond 5% threshold. In contrast, other listed companies require only disclosures after crossing specific thresholds.

SEBI regulations demand that investors disclose their holdings of over 5% within two working days and further disclosure is required if the stake increases or decreases by 2% or more.

The approval granted to HDFC Bank remains valid until January 2, 2026, subject to certain conditions including ensuring that the "aggregate holding" of its group entities in these banks does not exceed 9.5% of their paid-up share capital or voting rights at any time.