The Reserve Bank of India (RBI) has granted approval to HDFC Bank to acquire a maximum stake of 9.50% in AU Small Finance Bank within one year from the date of RBI approval letter. If this condition is not met, the central bank's approval will be revoked.
AU Small Finance Bank (SFB) has received a copy of an RBI letter dated January 3, 2025, which was addressed to HDFC Bank Limited, granting approval for HDFC Bank and its group entities (including HDFC Mutual Fund, HDFC Life Insurance, HDFC Pension Management, HDFC ERGO General Insurance, and HDFC Securities) to acquire up to 9.50% of AU SFB's paid-up share capital or voting rights within one year.
HDFC Bank has also disclosed to the exchanges that it has received approval from the RBI to acquire up to 9.5% aggregate holding in Kotak Mahindra Bank and Capital Small Finance Bank.
"AU Small Finance Bank (SFB) has received a copy of an RBI letter dated January 3, 2025, addressed to HDFC Bank Limited, granting approval for HDFC Bank and its group entities (including HDFC Mutual Fund, HDFC Life Insurance, HDFC Pension Management, HDFC ERGO General Insurance, and HDFC Securities) to acquire up to 9.50% of AU SFB's paid-up share capital or voting rights within one year. If the acquisition is not completed within this period, the approval will be cancelled," AU Small Finance Bank said in an exchange filing.
This approval is valid for a year from the date of the RBI's letter, expiring on January 2, 2026.
HDFC Bank needs to ensure that the "aggregate holding" by its group entities in the above-mentioned banks does not exceed 9.50% of the paid-up share capital or voting rights of the respective banks, at all times.
HDFC Bank does not plan to make investments in these banks due to the potential for exceeding the 5 per cent limit set for the HDFC Bank group entities.
As per the RBI Directions 2023, the term "aggregate holding" encompasses shares held by the bank, its affiliates, mutual funds, trustees, and entities within the promoter group. While HDFC Bank has no intention of investing in these banks, there is a possibility that the group's aggregate holding could surpass the 5% threshold. Given this, HDFC Bank has submitted a request to the RBI seeking approval for an increase in investment limits.
AU Small Finance Bank is a scheduled commercial bank listed on the BSE 100 index with a market cap of Rs 42,678.04 crore, considerably smaller than HDFC Bank’s market cap of Rs 13,37,919.84 crore.