RBI grants approval for LIC to acquire up to 9.99% stake in HDFC Bank

RBI nod for LIC HDFC Bank stake: The Reserve Bank of India (RBI) has given the green light for Life Insurance Corp. of India (LIC) to acquire a substantial 9.99 per cent stake in HDFC Bank, as revealed by the country's largest private lender on January 25 in a filing to stock exchanges.HDFC Bank disclosed, "LIC has been advised by RBI to acquire the aforesaid major shareholding in the Bank within a period of one year i.e. by January 24, 2025." The bank emphasised that LIC must ensure that its aggregate holding in HDFC Bank does not surpass 9.99 per cent of the paid-up share capital or voting rights at any given time.As of December 31, LIC holds a 5.19 per cent stake in HDFC Bank, according to the lender's shareholding pattern.The RBI communicated its decision to LIC through a letter dated January 25, granting the insurance giant the authority to acquire an aggregate holding of up to 9.99 per cent of the paid-up share capital or voting rights of HDFC Bank Limited.This development is anticipated to be positively received by HDFC Bank's shareholders, particularly in light of recent heavy sell-offs that drove the bank's shares near 52-week lows following the announcement of its third-quarter earnings. Some market analysts speculate that the sell-off was triggered by foreign investors reacting to a recent Securities and Exchange Board of India (SEBI) proposal related to foreign portfolio investors.However, HDFC Bank clarified earlier in the day that there was no evidence linking the selling by foreign portfolio investors to the recent SEBI guidelines.On January 25, HDFC Bank's shares closed at Rs 1435.30 apiece on the BSE, marking a 1.41 per cent decline from the previous close. Meanwhile, the benchmark equity index Sensex closed 0.51 per cent down at 70,700.67 points.In its financial report for the October-December quarter of 2023-24, HDFC Bank recorded a net profit of Rs 16,372 crore, reflecting a substantial 33.5 per cent increase from the previous year. The bank's net interest income (NII) also saw a significant growth of 23.9 per cent, reaching Rs 28,470 crore.Despite the positive financial performance, investor response to the numbers was tepid, leading to a drop in share prices in the subsequent days. The bank's provisions increased by 50 per cent, with Srinivasan Vaidyanathan, Chief Financial Officer, mentioning that the provision number includes contingent provisions of around Rs 1,212 crore related to investments in alternative investment funds.HDFC Bank's gross non-performing assets (NPA) stood at 1.26 per cent, a slight increase from the previous year, while net NPA improved to 0.31 per cent compared to 0.33 per cent last year. Total advances of the bank surged by 62.4 per cent to Rs 24.69 lakh crore, demonstrating robust growth across various loan segments.

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RBI grants approval for LIC to acquire up to 9.99% stake in HDFC Bank

As of December 31, LIC holds a 5.19% stake in HDFC Bank, according to the lender's shareholding pattern.

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