is still in talks with the (RBI) for the forbearance it has sought with respect to HDFC Ltd’s investments in its associates and subsidiaries. It is awaiting a final response from the regulator on this issue.


At an NCLT-convened meeting of equity shareholders of HDFC, its chairman said: “We have applied to the RBI to allow all our subsidiaries to become bank subsidiaries. We have not heard from them (the RBI). Whichever they permit, will become subsidiaries of the bank; whichever they do not permit, we will have to find a solution of disposing them before the effective date. Or we may get some time from the RBI to divest our investments”.


Section 19(2) of the Banking Regulation Act restricts a bank from holding shares in excess of 30 per cent of the capital of a company, unless it is a subsidiary of the bank. Accordingly, requests for forbearance have been made to the RBI by in relation to shareholding in associates and subsidiaries post-merger.


According to HDFC’s latest annual report, the mortgage lender has over 10 subsidiaries, including Insurance, General Insurance, and HDFC .


has requested the RBI for a phased-in approach to meet the SLR (statutory liquidity ratio)/ CRR (cash reserve ratio) and priority sector lending (PSL) requirements, and grandfathering of certain assets and liabilities and in respect of some subsidiaries. The bank has asked the RBI for two-three years to be compliant with the CRR/SLR, and PSL requirements of existing assets of HDFC. HDFC — an NBFC — does not have CRR/SLR and priority sector obligations like banks.


It has also asked the RBI to permit it to hold a 50 per cent stake in HDFC Life, the life insurance subsidiary of HDFC, which will become the bank’s subsidiary after the merger. Currently, HDFC holds around 48 per cent in HDFC Life, 50 per cent in General Insurance, and 52.60 per cent in HDFC Company.


On the forbearance sought on SLR/CRR, Parekh said the merged entity is expected to have sufficient liquidity and alternatives available to meet necessary liquidity requirements. “We are still in dialogue and we are awaiting the RBI’s response”, he said. “Even if the RBI does not grant forbearance on PSL compliance, it does not get triggered immediately on the basis of the joint financial statements on Day 1 of the merger. In other words, HDFC Bank will have 12 months to meet the requirements as on the effective date”.


Parekh said that the effective date of the merger will depend on regulatory approvals but he expects the merger process to get over by June 2023.


The merging entities — HDFC & HDFC Bank — have constituted an integration committee and various sub-committees to ensure smooth integration of all business integrals, as well as corporate functions. The entities have identified around 40 work streams and more than 100 senior employees from each side are working towards a proper integration, Parekh said.



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