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HDFC Bank petitions RBI to transfer stake from HDFC subsidiaries

HDFC Bank will hold stakes in the subsidiary companies of HDFC including large businesses like mutual fund, life and general insurance post the merger of HDFC with itself but will comply with the regulatory guidelines on the same CEO Sashidhar Jagdishan said.

“Subsidiaries will remain subsidiaries of the bank. We like all those companies. They are all valuable entities and if there is regulatory approval to increase the holdings we will be happy to do so. But I am not too sure about what the regulatory process. We are also happy to pare it down if the approvals don’t come but the intent is to increase,” Jadishan said.

HDFC and HDFC Bank have written to RBI to transfer the stake of the subsidiaries from the housing finance company to the bank. HDFC CEO Keki Mistry said he is confident that the RBI will give an approval for the bank to hold stake in these subsidiaries.

“To my mind the RBI should give us the approval for the bank to hold investments in HDFC Life, HDFC AMC and the other subsidiaries the way similar exemptions are given to other banks which hold insurance companies so we are hopeful of getting that approval. We would like to increase our stake in HDFC Life if possible to 50% so that it remains a subsidiary of the bank,” Mistry said.

HDFC holds 48% in HDFC Life, 53% in HDFC Asset Management Co, the mutual fund arm and 51% in HDFC Ergo General Insurance Co Ltd. There are no restrictions on a bank holding stake in the mutual fund business, but RBI has certain restrictions on banks holding stake in insurance companies.

“The RBI rule says either you have to have 50% or 30% and we are at 48% in our life insurance subsidiary. So, we have taken up the matter with RBI and we have to get a reply sometime sooner, permitting us to keep the stake as it is or they may tell us to buy that extra stake, which we can easily buy in the market to be compliant with the banking regulation of holding 50%. Ultimately we have to comply with RBI regulations and if there is a change we will accept the change. We have confirmed to the RBI that whatever rules they have for other banks on insurance companies the same will apply to us ,” said Deepak Parekh, chairman of HDFC.

Jagdishan said the bank will do what is complaint with the regulator. “We have sought the approval to allow the holding in all the subsidiaries to the bank but if they were to say no we will comply with the regulation. We have no hesitation about that. In that case HDFC can monetise that or if possible we will try and integrate it within the bank,” Jagdishan said.

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