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ICICI Direct Report
As per latest exchange filing, Reserve Bank of India has made a few clarifications with respect to the HDFC Bank Ltd. and Housing Development Finance Corporation Ltd. merger.
On priority sector lending requirements, RBI said adjusted net bank credit may be calculated as one-third of outstanding loans of HDFC (as on the effective date) for the first year and remaining two third over next two years equally. We believe gradual inclusion of parent loans for PSL calculation remains positive. First year for consideration will be one-year completion from effective date.
HDFC Bank shall continue to comply with extant requirements of cash reserve ratio, statutory liquidity ratio, liquidity cover ratio from the effective date without any exceptions. Compliance on regulatory requirement (CRR, SLR and LCR) is likely to have a limited impact considering the bank indicating readiness for the same.
RBI has allowed HDFC Bank to increase its stake above 50% in HDFC Life (HDFC stake is 48.6% as of March 2023) and HDFC Ergo General Insurance (HDFC stake is 50.5% as of March 2023) prior to effective date. This removes overhang on listed subsidiaries in near term.
RBI has also allowed HDFC Bank to continue holding HDFC’s stake (currently 100%) in HDFC Education and Development Services Pvt. Ltd. for two years from effective date. In HDFC Credila Financial Services, HDFC Bank will have to bring down its stake to 10% (from 100%) within two years from effective date and shall not onboard new customers.
One-time mapping of HDFC’s borrowers must be done by HDFC Bank for benchmark and spreads. All retail, micro, small and medium enterprise and other floating rate loans sanctioned by HDFC would be linked to appropriate benchmark within six months from the effective date.
The asset classification of accounts in the books of HDFC Bank will be as per the norms applicable to banks from the effective date.
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