HDFC Bank has received approval from the Reserve Bank of India (RBI) to allow its group entities to increase their collective stake in Kotak Mahindra Bank, AU Small Finance Bank, and Capital Small Finance Bank up to 9.5% of their respective paid-up share capital. This approval, granted by RBI on January 3, 2024, covers group entities such as HDFC Mutual Fund, HDFC Life Insurance, HDFC ERGO General Insurance, and HDFC Pension Fund Management.
While HDFC Bank itself does not plan to invest directly in these banks, the combined stake of its group entities is set to exceed the previously stipulated 5% limit. This prompted HDFC Bank to formally request approval from the RBI on September 20, 2024, to increase its investment threshold. The group’s substantial investments, including HDFC Mutual Fund’s Rs 7.7 lakh crore assets under management (AUM) and HDFC Life Insurance’s close to Rs 3 lakh crore, contribute to the decision.
The RBI’s approval allows the group entities to increase their holdings, provided the aggregate stake does not exceed 9.5% of the share capital or voting rights in any of the three banks. The approval is valid until January 2, 2026, and comes with certain conditions. Under RBI’s 2023 guidelines on banking share acquisitions, investors must seek prior approval for stakes exceeding 5% in banking institutions, unlike other sectors where public disclosures are triggered after specific thresholds.
