The Reserve Bank of India has granted HDFC Bank permission to buy and hold an aggregate stake of up to 9.5% in IndusInd Bank under the regulatory framework governing large holdings in banks. IndusInd Bank reported the approval in a regulatory filing.

Key Highlights

• RBI allows HDFC Bank group entities to hold up to 9.5% stake in IndusInd Bank.
• Approval valid for one year, requiring combined holding remain within 9.5% of capital or voting rights.

HDFC Bank has confirmed that it does not intend to invest directly in IndusInd Bank. According to the stock exchange notification, HDFC Bank, as the banking entity regulated by RBI (on behalf of its group companies), received approval from the RBI to increase its investment in IndusInd Bank from 5% to 9.5%; however, a spokesperson stated that HDFC Bank has no plans to invest in IndusInd Bank.

The planned investments will be made by HDFC Bank group firms, as specified in the exchange filing. "These investments would be made by the respective companies in their normal course of business and from the open market," according to a spokeswoman.

According to sources, the RBI license is largely intended to simplify portfolio investments by HDFC group enterprises, particularly its mutual fund and insurance businesses. Market participants see the stake as financial rather than strategic, with RBI regulations and concentration limits making a takeover transaction difficult.

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The approval enables HDFC Bank, as the sponsor and promoter of its larger financial services group, to own up to 9.5% of IndusInd Bank's paid-up share capital or voting rights on an aggregate basis.