LIC gets approved by RBI to hold up 9.99% stake in HDFC Bank

The Reserve Bank of India has approved the proposal of LIC to sustain a 9.99% stake in HDFC Bank. The recent shareholding details showed LIC holding at 5.19% in the respective banks.

LIC gets approved by RBI to hold up 9.99% stake in HDFC Bank

New Delhi: As per the approval, the public sector insurer must acquire a major shareholding in the HDFC Bank within one year. Additionally, the insurance giant must ensure the aggregate shareholding in the bank is not exceed up to 9.99% of the paid-up share capital or voting rights of the bank at any time.

As per the regulations illustrated by the central bank, any entity seeking to acquire a major holding, conventional aggregate shareholding of 5% or more of the paid-up share capital or voting rights, must obtain a prior nod from the authority. Broadly, in a banking concept theory, entities specified as fit and proper can hold up to 5% without requiring any approval.

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The approval led by controlling authority is specifically subject to LIC’s compliance with various regulations, including the Banking Regulation Act, 1949, RBI’s Master Direction and Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies, the Foreign Exchange Management Act, 1999 and regulations issued by market regulator SEBI.

HDFC Bank shares experienced a significant decline following a Q3 result and the approval for LIC to purchase an additional 4.8% stake in private lender shares may improve the outlook for the stock.

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