Relief For HDFC Bank, HDB Financial As RBI Removes Restrictions On Business Overlaps

In what can be seen as a relief for HDFC Bank and HDB Financial Services Ltd., the Reserve Bank of India has removed the proposed regulatory restriction on business overlaps of bank and its group entities.

"The proposed regulatory restriction on overlap in the businesses undertaken by a bank and its group entities is being removed from the final guidelines. The strategic allocation of business streams among group entities will be left to the wisdom of bank boards," RBI Governor Sanjay Malhotra said on Wednesday.

To add some context, RBI's draft circular from Oct 2024 proposed limits on excessive overlap between businesses done by banks and their NBFC units. This move was seen to directly impact a few banks and their NBFC subsidiaries, including HDFC Bank and HDB Financial.

The shares of HDFC Bank rose over 1% after the annoucement by thge RBI Governor to Rs 961.4. The scrip was trading 0.98% higher at Rs 960 apiece on the NSE, while these gains compare a to 0.31% advance in the Nifty 50 as of 11:04 a.m.

During a press conference ahead of its initial public offering, HDB Financial's management had indicated that the company was not directly impacted by RBI circular, rather the bank was the one towards whom the circular was directed at.

The management had also said that some business that HDB has set up is common to what HDFC Bank does.

On Wednesday, RBI Governor Malhotra said that the draft paper has been finalised after public consultations and it will be issued shortly.