The Reserve Bank of India has recently clarified that private lender HDFC Bank will hold commercial papers issued by HDFC Ltd till their maturity. Earlier on April 20 this year, HDFC Bank had asked RBI to clarify on commercial papers in the wake of the HDFC twins merger.
The central bank has asked HDFC Bank to not roll over or re-issue commercial papers issued by HDFC Ltd after the effective merger date.
HDFC Bank, in a regulatory filing on Friday, informed about the RBI's reply. "We wish to inform that HDFC Bank had made a request to RBI to provide confirmation about the commercial papers of HDFC Limited. Pursuant to the same, the RBI has, vide its email dated June 16, 2023, advised HDFC Bank that it may hold the commercial papers that were issued till date by HDFC Limited, till their maturity, and that it shall not roll over or reissue any commercial paper after the effective date of the Proposed Amalgamation (“Effective Date")."
The private lender further added that it will also approach the RBI with the crystalised amounts of all the liabilities of HDFC Limited as of the Effective Date.
The RBI issued the clarification after HDFC Bank, in a letter on April 04, 2022, informed about the decision taken by the Board of Directors of HDFC Bank Limited (“HDFC Bank") approving the Scheme under Sections 230 to 232 of the Companies Act, 2013, and rules and regulations thereunder, subject to receipt of various statutory and regulatory approvals.
On April 21, 2023, HDFC Bank in a regulatory filing talked about Sebi's approval in regard to the proposed change in control of HDFC AMC citing,
"We understand that SEBI vide its letter dated April 21, 2023 to HDFC Asset Management Company Limited (“HDFC AMC"), a subsidiary of HDFC Limited and the asset management company of HDFC Mutual Fund (“HDFC MF"), has granted its approval for the proposed change in control of HDFC AMC."
"We also refer to our earlier letters, wherein we had informed you about the receipt of no-objection/ approval letters including from stock exchanges, Reserve Bank of India, Securities and Exchange Board of India, Pension Fund Regulatory and Development Authority, Competition Commission of India and Hon’ble National Company Law Tribunal, Mumbai bench," the lender added.
On Wednesday it was reported that Sebi will not give special exemptions to mutual funds if they breach the norms for maximum permitted holdings in a security after the merger of HDFC Bank and HDFC Ltd. A Reuters report said pressure on mutual funds to reduce their holdings or any limitations on increases could be an overhang on the stock of the merged entity.
As per the Sebi's rules, a mutual fund scheme cannot invest more than 10 per cent in a single security. However, exchange-traded funds and funds that invest in particular sectors are exempt.
At least 60 equity mutual fund schemes will see their combined exposure to HDFC Bank and HDFC overshoot the 10 per cent cap, the Reuters report said. The matter has been referred to the Association of Mutual Funds in India (AMFI), according to two mutual fund executives.
Last week, AMFI officials and industry executives analysed the impact of the merger and how much of the stock the industry would need to sell to adhere to regulatory limits, the executives said.
HDFC Bank and HDFC Ltd merger will conclude in the next few weeks to create the country’s second-largest financial institution by assets after the State Bank of India.
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