hdfc: RBI approves merger of HDFC Bank with parent HDFC Corp

Private lender on Monday said that it has received the Reserve Bank of India‘s nod for its merger with parent Corp. The bank had applied to the RBI in April this year and is expecting to complete the merger process in the next 12-18 months.

“HDFC Bank has received a letter dated July 04, 2022 from the Reserve Bank of India whereby the RBI has accorded it’s ‘no objection’ for the Scheme, subject to certain conditions as mentioned therein,” the bank said in an exchange filing.

The bank did not specify the conditions laid down by the regulator.

Earlier HDFC Bank had stated that it has been applied to the RBI seeking leeway to meet certain regulatory conditions. The bank has requested a phased-in approach in respect of SLR and CRR, priority sector lending as well as grandfathering of certain assets and liabilities and in respect of some of its subsidiaries. The bank had sought two-three years to meet SLR and CRR norms for all new loans.

The bank had also requested to keep stake in the insurance venture at the current level or buy additional stake from the market to meet the banking regulator’s requirement of 50%. It could not be immediately verified if all these requests have been accepted by the regulator.

In May this year HDFC Bank MD Sashidhar Jagdishan had stated that HDFC 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 banking regulator had asked it to keep The structure of the merged entity is 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.”

The lender also said that the merger is subject to statutory and regulatory approval from the Competition Commission of India, the National Company Law Tribunal and the respective shareholders and creditors of the companies. Last week, the bank had said it got “no adverse observations” from the stock exchanges 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 Rs 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 (NBFC) .

According to HDFC Bank’s internal estimates, the merger would lead to a SLR-CRR requirement of nearly Rs 70,000 crore, along with an incremental Rs 1.75 lakh crore to meet priority sector lending (

) norms.

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