NCLT okays HDFC, HDFC Bank merger, paving way for creation of finance giant

HDFC Bank awaiting clarity from the RBI on forbearances as merger gets last regulatory approval

The Mumbai bench of National Company Law Tribunal (NCLT) has approved the merger of mortgage financier HDFC Ltd into HDFC Bank, paving the way for one of the largest financial behemoths in India.

The merger already has approvals from the Securities and Exchange Board of India (Sebi) and the Competition Commission of India (CCI), shareholders of both entities. It has also approval from the Reserve Bank of India (RBI) and the two stock exchanges.

The merger was announced in April 2022, wherein HDFC Investments Ltd and HDFC Holdings Ltd, which are wholly owned subsidiaries of HDFC, would merge with and into HDFC Ltd. Then HDFC would merge with HDFC Bank. Regulatory approvals have come earlier than the 15 to 18 months envisaged.

While all approvals are in place now, HDFC Bank is still awaiting clarity from the RBI on the forbearances it has sought.

HDFC Bank 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 HDFC Ergo General Insurance, and 52.60 per cent in HDFC Asset Management Company.

Meanwhile, HDFC Ltd has informed the exchanges that its board will consider issuance of unsecured redeemable nonconvertible debentures, in various tranches, under a Shelf Placement Memorandum, aggregating Rs 57,000 crore on a private placement basis, in accordance with the approval granted by the shareholders of the Corporation at the 45th Annual General Meeting held on June 30, 2022.