The Mumbai Bench of the National Company Law Tribunal (NCLT) on Friday approved the merger of mortgage lender HDFC Ltd with HDFC Bank, paving the way for one of India’s biggest financial giants.
The merger has already been approved by the Securities and Exchange Board of India (Sebi) and the Competition Commission of India (CCI), shareholders of both companies. It also has the approval of the Reserve Bank of India (RBI) and the two stock exchanges.
The merger of the two companies was announced in April 2022 whereby HDFC Investments Ltd and HDFC Holdings Ltd, which are wholly owned subsidiaries of HDFC, would merge with and become HDFC Ltd. Then HDFC would merge with HDFC Bank. The official approvals are available before the planned 15 to 18 months.
While all approvals are now in place, HDFC Bank is still awaiting clarification from RBI on the forbearance it is seeking.
HDFC Bank has requested a phased approach from RBI to address SLR (statutory liquidity ratio)/CRR (cash reserve ratio) and Priority Sector Lending (PSL) requirements and grandfathering for certain assets and liabilities and in relation to some subsidiaries fulfill . The bank has asked RBI to meet the CRR/SLR and PSL requirements of HDFC’s existing assets for a period of two to three years. HDFC, an NBFC, does not have CRR/SLR and priority sector obligations like banks.
It has also asked RBI for permission to hold a 50 per cent stake in HDFC Life, HDFC’s life insurance subsidiary, which will become a subsidiary of the bank after the merger.
HDFC currently owns around 48 percent of HDFC Life, 50 percent of HDFC Ergo General Insurance and 52.60 percent of HDFC Asset Management Company.
Meanwhile, HDFC Ltd has informed the stock exchanges that its board will consider issuing unsecured, redeemable, non-convertible debentures in various tranches under a shelf placement memorandum totaling Rs 57,000 crore on a private placement basis, in Consistent with shareholder approval from the Company at the 45th Annual General Meeting on June 30, 2022.
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