HDFC Bank - RBI Provides Key Forbearances Toward Impending Merger: Motilal Oswal

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .Motilal Oswal Report.HDFC Bank Ltd. has reported that Reserve Bank of India has provided some key forbearances with respect to the ongoing merger process between HDFC Bank and Housing Development Finance Corporation Ltd. The regulator’s decision is still pending on certain other matters. Below are the key highlights:Priority sector lending requirement to be met in a staggered manner – a key positive RBI has allowed calculating the adjusted net bank credit for meeting the PSL requirement, by considering only one-third of the outstanding loans of HDFC as on the effective date of the amalgamation for the first year. The remaining two-thirds of the portfolio of HDFC shall be considered over the next two years. CRR, SLR, and LCR requirement to be met from Day 1; seems manageableHDFC Bank shall continue to comply with the extant requirements of cash reserve ratio (4.5% of NDTL), statutory liquidity ratio (18% of NDTL), and liquidity coverage ratio ratio from the effective date of merger without any exceptions. Both the bank and HDFC has been increasing the liquidity buffer on the balance sheet and we believe that the bank will be able to broadly meet these requirements without any challenge.Allowed to raise stake in insurance subs to more than 50%Significant positive RBI has permitted HDFC Bank or HDFC to increase the shareholding to more than 50% in both HDFC Life Insurance Company Ltd. and HDFC ERGO, prior to the effective date. HDFC currently holds 48.7% in HDFC Life and 49.9% in HDFC ERGO. We believe this removes a key overhang on HDFC Life and could enable an additional buying of Rs 22 billion for HDFC Life. Further, investments of HDFC are allowed to continue as investments of HDFC Bank..Click on the attachment to read the full report:.HDFC Bank-HDFC Merger Related Clarification From RBI Remains Positive: ICICI Direct.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

HDFC Bank - RBI Provides Key Forbearances Toward Impending Merger: Motilal Oswal

PSL compliance deferred; allowed to increase stake in insurance subs.

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