HDFC Bank Gets RBI Nod to Merge with Parent HDFC

HDFC Bank has received approval from the Reserve Bank of India for its merger with parent HDFC, it said on Monday. The bank had applied to the RBI in April. It is expecting to complete the merger process in the next 12-18 months.

“HDFC Bank has received a letter dated July 4 from the Reserve Bank of India whereby the RBI has accorded its ‘no objection’ for the scheme, subject to certain conditions as mentioned therein,” the bank said in a filing to the stock exchanges.

The private sector lender did not, however, specify the conditions laid down by the regulator. HDFC Bank had sought leeway from the RBI to meet certain regulatory conditions. The bank had requested a phased-in approach with respect to its Statutory Liquidity Ratio and Cash Reserve Ratio, priority sector lending as well as grandfathering of certain assets and liabilities, and some of its subsidiaries.

The bank had sought two-three years to meet the SLR and CRR norms for all new loans.

The bank had sought the banking regulator’s permission to retain its stake in its insurance venture at the current level or buy additional stake from the market to meet the 50% stake requirement.

It could not be immediately verified if all these requests had been accepted.

In May, HDFC Bank managing director Sashidhar Jagdishan said the bank’s merger with HDFC Ltd had received in-principle approval from the Prime Minister’s Office, the finance ministry and the Reserve Bank of India, adding that the regulator had asked it to keep the structure of the merged entity simple, with HDFC Bank being the holding company.

“The structure that we have applied for is the structure that has been asked by the regulator,” Jagdishan had said. “Till the tax neutrality is not resolved, the regulator is very clear, keep it simple. It’s an A plus B merger where HDFC Bank will be the holding company. Like you have in a large PSU bank and two other private sector banks, where they have allowed banks to have some subsidiaries, we have asked for a similar structure,” he had said.

The lender also said the merger is subject to statutory and regulatory approvals from the Competition Commission of India, the National Company Law Tribunal and the respective shareholders and creditors of both companies.

Last week, the bank said it received “no adverse observations” from the NSE and BSE on the proposed merger.

On April 4, mortgage lender HDFC proposed to merge with HDFC Bank to create a financial services behemoth of ₹ 13 lakh crore, as a series of regulatory tightening measures had over the years nullified HDFC’s advantages of remaining a Non-Banking Financial Company.

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