The Reserve Bank of India (RBI) has granted HDFC Bank, India's largest private lender, permission to acquire up to a 9.5 percent stake in AU Small Finance Bank within a year from the approval date. If the acquisition is not finalized within this timeframe, the approval will lapse.
In a regulatory filing, AU Small Finance Bank shared that the central bank’s letter, dated January 3, 2025, allows HDFC Bank and its group companies—including HDFC Mutual Fund, HDFC Life Insurance, HDFC Pension Management, HDFC ERGO General Insurance, and HDFC Securities—to collectively purchase up to 9.5 percent of AU SFB’s paid-up share capital or voting rights.
HDFC Bank, in a separate announcement, disclosed it has also secured RBI’s nod to acquire up to a 9.5 percent aggregate stake in Kotak Mahindra Bank and Capital Small Finance Bank. This approval remains valid until January 2, 2026.
However, the bank must ensure that the combined ownership by its group entities in these institutions does not exceed the 9.5 percent threshold at any point. The RBI Directions 2023 specify that "aggregate holding" includes shares owned by the bank, its affiliates, mutual funds, trustees, and promoter group entities.
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Although HDFC Bank does not intend to directly invest in these banks, the collective holding of its group companies could surpass the 5 percent cap. To address this, the bank sought regulatory clearance to raise its investment limit.
Given the broad-based selloff on January 3, HDFC Bank shares slipped 2.5 percent to close at Rs 1,749. Trading volumes were also high as 1 crore shares changed hands, higher than the one-month and one-week average of 94 lakh shares, Moneycontrol data showed.
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