In a recent development, the Reserve Bank of India (RBI) has given the green light to Life Insurance Corp. of India (LIC) to acquire up to 9.99% stake in HDFC Bank, the nation’s largest private lender. This move comes as a significant development for both institutions, with implications for the banking sector and HDFC Bank’s shareholders.
The RBI’s decision allows LIC, which currently holds a 5.19% stake in HDFC Bank, to increase its shareholding within the next year, by January 24, 2025. The central bank has directed LIC to ensure that its aggregate holding in the bank does not exceed 9.99% of the paid-up share capital or voting rights at any given time.
HDFC Bank’s shareholders are likely to view this development positively, especially in light of recent market trends. The bank’s shares experienced a significant sell-off, driving them close to 52-week lows after the announcement of its third-quarter earnings. Some market analysts had attributed this downturn to foreign investors reacting to a proposal by the Securities and Exchange Board of India (Sebi) concerning foreign portfolio investors.
Despite speculation linking the sell-off to Sebi guidelines, HDFC Bank has clarified that there is no evidence supporting such claims. The RBI’s approval for LIC to acquire a larger stake is expected to provide a boost to investor confidence in HDFC Bank, potentially stabilizing its share prices.
LIC’s decision to increase its stake in HDFC Bank aligns with strategic moves by insurance companies seeking diversified investment portfolios. As one of the leading players in the insurance sector, LIC’s expanded presence in the banking sector could bring about synergies and opportunities for growth.
