RBI allows HDFC Bank to meet priority sector goal in 3 years post merger

Allows to raise stake in insurance JVs; No exemption on CRR/SLR

The Reserve Bank of India has allowed HDFC Bank to meet priority sector lending requirements post the merger with HDFC Ltd in a gradual manner, the lender has informed the exchanges. The regulator has also allowed HDFC or HDFC Bank to increase their stake in the insurance joint venture to 50 per cent before the effective merger date.

HDFC Bank said the communication from RBI was received by the bank on April 20.

 

On priority sector lender requirements, the regulator said the adjusted Net Bank Credit may be calculated considering one-third of the outstanding loans of HDFC Ltd as on the effective date of the merger for the first year. The remaining two-thirds of the portfolio of HDFC Ltd will be considered over a period of next two years equally.

Investments in subsidiaries and associates of HDFC Ltd are allowed to continue as those of HDFC Bank. The RBI has permitted HDFC Bank or HDFC Ltd to raise shareholding to more than 50 per cent in HDFC Life Insurance Company Ltd and HDFC ERGO General Insurance Company Ltd prior to the effective date, the exchange notification said.

RBI has allowed HDFC Bank to hold HDFC’s stake in HDFC Education and Development Services Pvt Ltd, engaged in operating three education schools, from the effective date of merger.

In HDFC Credila Financial Services Ltd, HDFC Bank will need to bring down stake to 10 per cent within two years from the effective date and will not be allowed to on-board new customers.
 

HDFC has 100 per cent stake in both school education and Credila.

“HDFC Bank shall continue to comply with extant requirements of CRR, SLR and LCR from the Effective Date without exceptions,” HDFC Bank said.

 

On interest rate benchmarks, RBI has asked for a one-time mapping of all borrowers of HDFC Ltd would need to be done by HDFC Bank for benchmark and spreads. All retail, MSME and other floating rate loans sanctioned by HDFC Ltd would be linked to appropriate benchmarks within six months from the effective date.

The regulator said on the basis of the list submitted by HDFC Ltd, RBI has permitted loans against shares for promoter contribution in excess of Rs 20 lakh to individuals, to continue for its existing duration/maturity.

HDFC Bank said it would engage with RBI for some clarifications on the regulator's communication and will also it with the crystallised amounts of the liabilities as of the effective date.