RBI Approves HDFC Bank Acquisition of Stake in AU Small Finance Bank and Others

The Reserve Bank of India (RBI) has granted HDFC Bank, India’s largest private lender, approval to acquire up to a 9.5% stake in AU Small Finance Bank within one year of the approval date. If the acquisition is not completed within this period, the approval will expire.

In a regulatory filing, AU Small Finance Bank announced that the RBI’s letter, dated January 3, 2025, permits 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% of AU SFB’s paid-up share capital or voting rights.

Additionally, HDFC Bank revealed that it has secured RBI’s approval to acquire up to a 9.5% stake in both Kotak Mahindra Bank and Capital Small Finance Bank. This approval is valid until January 2, 2026. However, the bank and its affiliates must ensure their combined stake in these institutions does not exceed the 9.5% threshold at any time. According to RBI Directions 2023, “aggregate holding” includes shares owned by the bank, its affiliates, mutual funds, trustees, and promoter group entities.

While HDFC Bank does not plan to directly invest in these banks, the collective holding of its group companies could exceed the 5% cap. To address this, the bank sought regulatory approval to increase its investment limit.

On January 3, amid a broad-based selloff, HDFC Bank’s shares fell by 2.5%, closing at Rs 1,749. The trading volumes were notably high, with 1 crore shares changing hands, surpassing the one-month and one-week averages of 94 lakh shares, according to Moneycontrol data.

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