RBI asks HDFC Bank to comply with CRR, SLR, LCR post HDFC merger

The Reserve Bank of India (RBI) has asked HDFC Bank to continue to comply with regulatory requirements for cash reserve ratio (CRR), statutory liquidity ratio (SLR) and liquidity coverage ratio (LCR), without exceptions, post the merger of HDFC Limited.

Post the merger, asset classification of loans will also continue to be as per applicable norms for banks. Investments, including subsidiaries and associates of HDFC, will continue as investments of HDFC Bank, the private sector lender said in an exchange filing. HDFC Bank had requested RBI to make certain dispensations in view of the merger, to which the regulator responded on April 20, granting certain forbearances and clarifications.

The RBI has allowed HDFC Bank to calculate adjusted net bank credit for the purpose of priority sector lending (PSL) targets, considering one-third of HDFC’s outstanding loans as on the merger date for the first year. The remaining portfolio will need to be equally considered over the next two years.

Shareholding

The regulator also allowed HDFC Bank or HDFC to increase their shareholding in HDFC Life Insurance and HDFC ERGO General Insurance to over 50 per cent, prior to the effective date. HDFC Bank can also continue holding HDFC’s stake in HDFC Education and Development Services for two years. The stake in HDFC Credila Financial Services will need to be brought down to 10 per cent within two years without onboarding new customers. HDFC’s loan against shares for promoter contribution, or in excess of ₹20 lakh to individuals, will be allowed to continue till maturity.

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The bank said it will need to undertake a one-time mapping of HDFC’s borrowers for benchmark and spreads, wherein all retail, MSME and other floating rate loans of HDFC will be linked to appropriate benchmarks within six months from the merger.

HDFC Bank may engage with the RBI for certain clarifications in respect of this letter and will also approach the regulator with the crystalised amounts of the liabilities as of the effective date, it said.