HDFC Bank Secures RBI Approval to Acquire Stakes in Peer Banks

HDFC Bank, India’s largest private sector lender, has received the Reserve Bank of India’s (RBI) approval to acquire up to a 9.5% stake in Kotak Mahindra Bank, AU Small Finance Bank, and Capital Small Finance Bank. This strategic move is facilitated through its group entities, including HDFC Mutual Fund, HDFC Life Insurance, HDFC ERGO General Insurance, and HDFC Pension Fund Management.

Strategic Investment Details

Approval Validity: The RBI’s approval is valid until January 2, 2026.

Aggregate Holding Limit: HDFC Bank must ensure that the combined stake of its group entities does not exceed 9.5% in each of the target banks.

Purpose of Investment: These investments are part of the regular course of business for HDFC Bank’s group entities, aiming to diversify their portfolios and strengthen strategic partnerships within the banking sector.

Context and Implications

This development comes after HDFC Bank’s merger with its parent company, HDFC, in July 2023, which significantly expanded its loan portfolio. Post-merger, the bank’s loan-to-deposit ratio increased to around 110%, prompting a focus on boosting deposits or moderating loan growth. In the quarter ending December 31, 2024, HDFC Bank reported a 4.2% increase in deposits to ₹24.53 trillion, outpacing a 0.9% rise in gross advances to ₹25.43 trillion.

Summary of the news