HDFC Financial institution has written to the Reserve Financial institution of India (RBI) asking for permission to carry both the 47.82 per cent stake that HDFC Ltd presently owns in life insurance coverage subsidiary HDFC Life or enable it to purchase extra stake within the firm from the market such that it will increase its holding to 50 per cent.
Deepak Parekh, chairman of HDFC, mentioned: “The RBI rule says both you will have above 50 per cent or 30 per cent, and we’re at 48 per cent in our life insurance coverage subsidiary. So, we’ve got taken up the matter with RBI and we’ve got to get a reply someday sooner, allowing us to maintain the stake as it’s or they could inform us to purchase that additional stake, which we are able to simply purchase out there to be compliant with the banking regulation of holing 50 per cent”.
On Monday, the boards of HDFC and HDFC Financial institution respectively permitted the amalgamation of the company with and into HDFC Financial institution. Put up the merger, HDFC Financial institution shall be 100 per cent owned by public shareholders and present shareholders of HDFC will personal 41 per cent of HDFC Financial institution. Topic to RBI and different regulatory approvals, materials subsidiaries and affiliate corporations of HDFC will proceed to be owned by HDFC Financial institution, the HDFC administration mentioned.
Parekh mentioned, the financial institution has requested the RBI to permit it to conform in a phased method with norms with respect to statutory liquidity ratio and money reserve ratio, precedence sector lending in addition to grandfathering of sure belongings and liabilities of a few of its subsidiaries. These requests are into account by the RBI by way of their letter to the financial institution dated
April 1.
HDFC has 47.82 per cent stake in HDFC Life, the listed life insurance coverage subsidiary of the mortgage financier. It additionally has a 49.98 per cent stake in HDFC Ergo, its basic insurance coverage arm.
A Macquarie analysis report mentioned the RBI’s approval shall be key because the financial institution will find yourself proudly owning 48 per cent within the life, round 50 per cent within the basic insurance coverage, and 69 per cent within the asset administration arms. “Very just lately, RBI didn’t enable Axis Financial institution to instantly personal [more than] 10 per cent in Max Life, and ICICI Financial institution was requested to deliver down shareholding in ICICI Lombard to [less than] 30 per cent”, the report added.
Speaking about this, Keki Mistry, vice-chairman and chief government officer, HDFC, mentioned in an analyst name: “There are already banks which personal fairness insurance coverage corporations, which aren’t capped at 10 per cent. We are going to, after all, be having detailed discussions with RBI however in the mean time we’ve got sought that the present subsidiaries of HDFC Ltd and our affiliate corporations will proceed to be subsidiaries and affiliate corporations of the financial institution.”
He added that the quick plan is that “HDFC Financial institution shall be an working financial institution in addition to holder in fairness of different companies like insurance coverage, asset administration and so and so forth. And, there may be present priority to that impact. If and when in future RBI requires banks to maneuver to a holding firm mannequin then at stage the financial institution will take a look at it”.
ICICI Financial institution presently holds 51.32 per cent in ICICI Prudential Life Insurance coverage and 48.05 per cent in ICICI Lombard Basic Insurance coverage. State Financial institution of India holds 55.48 per cent in its life insurance coverage subsidiary SBI Life Insurance coverage and 70 per cent in SBI Basic Insurance coverage. Equally, Kotak Mahindra Financial institution owns 100 per cent stake in each its life and basic insurance coverage subsidiaries.