RBI approves LIC's acquisition of 9.99% stake in HDFC Bank
Life Insurance Corporation of India (LIC), the nation's leading insurer, has been granted permission by the Reserve Bank of India (RBI) to acquire an aggregate 9.99% stake in HDFC Bank. LIC currently has a 5.19% stake in HDFC Bank. The RBI has now authorized LIC to increase its shareholding in HDFC Bank by an extra 4.8%, taking its total stake to 9.99%.
Acquisition must be completed with a year
The RBI has given the green light for LIC's acquisition based on the insurer's application. LIC has been instructed to complete the acquisition within one year, meaning by January 24, 2025. The central bank has specified that LIC's overall holding in HDFC Bank must not surpass 9.99% of the paid-up share capital or voting rights at any given moment.
RBI approval is subject to conditions
The RBI's approval comes with several conditions, as per the exchange filing. This includes adherence to the Banking Regulation Act of 1949 and RBI's Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies dated January 16, 2023. Provisions of the Foreign Exchange Management Act of 1999, regulations issued by the Securities and Exchange Board of India (SEBI), and other relevant guidelines, regulations, and statutes are also counted.
HDFC Bank's performance and outlook
On Thursday, HDFC Bank's stocks experienced a 1.4% decline, closing at Rs. 1,435.3 on the BSE. In the past two weeks, the stock has falled over 15%. The bank recently announced its third-quarter results, revealing that the net interest margin (NIM) on total assets dropped from 4.1% a year ago to 3.4%. The margin has been decreasing since its merger with HDFC in July last year due to increased borrowing and a lower-yielding loan book.
