RBI okays SBI Funds Management’s acquisition of 9.9% stake in HDFC Bank

The Reserve Bank of India (RBI) has given approval to SBI Funds Management to acquire up to 9.99% stake in merger-bound HDFC Bank Ltd, India's largest private bank in terms of market capitalisation.

HDFC Bank, in a statement to stock exchanges, said: "The Reserve Bank of India vide its letter dated May 16, 2023, addressed to SBI Funds Management Limited (SBIFML) has accorded its approval to SBIFML for acquiring up to 9.99% of the paid-up share capital or voting rights of HDFC Bank Limited (the Bank). The approval has been granted with reference to the application made by SBIFML to RBI."

The private lender said SBI Funds Management has been advised by the RBI to acquire the aforesaid major shareholding in the bank in a period of six months i.e. by November 15, 2023. "Further, SBIFML must ensure the aggregate holding in the Bank remains below 10% of the paid-up share capital or voting rights of the bank at all times."

The statement said the approval granted by the RBI is subject to the conditions, including compliance with the relevant provisions of 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 (as amended from time to time), provisions of the Foreign Exchange Management Act, 1999, provisions of the regulations issued by Securities and Exchange Board of India, among others.

HDFC Bank in April 2022 had announced its merger to create long-term value for all stakeholders, including customers, employees, and shareholders of both entities. The proposed transaction is to create a large balance sheet and net worth that would allow a greater flow of credit into the economy. Post the amalgamation, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.

Earlier, the stock exchanges Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) had given in-principle approval for the transfer of non-convertible debentures (NCDs) from HDFC (Housing Development Finance Corporation) Ltd to HDFC Bank, which was done to smoothen the merger process that's aimed to conclude in July 2023.

The proposed amalgamation now needs the final approval from the Securities and Exchange Board of India (SEBI), which will pave the way for the largest merger in the country’s corporate history.

The RBI in April 2023 had also approved HDFC Bank or HDFC (Housing Development Finance Corporation) Ltd's request to increase the shareholding to over 50% in HDFC Life Insurance Company Ltd and HDFC ERGO General Insurance Company Ltd post-merger.

Amid the development, shares of HDFC Bank dipped 0.39% to ₹1,640.85 today. HDFC Bank's Q4 profit grew 20.6% growth to ₹12,594.5 crore for January to March 2023 quarter on YoY basis, while the Q4 FY23 net profit of mortgage lender HDFC rose 20% year-on-year to ₹4,425 crore.