India’s largest private lender, HDFC Bank, has received regulatory approval from the Reserve Bank of India to acquire up to a 9.5 percent stake in IndusInd Bank.
IndusInd Bank said on Tuesday that the approval was granted on December 15 and allows HDFC Bank and its group entities to collectively build a significant holding in the troubled private sector lender. The RBI has stipulated that the stake must be acquired within one year, failing which the approval will lapse.
In a regulatory filing late on Monday, HDFC Bank said entities such as HDFC Mutual Fund, HDFC Life Insurance, HDFC Pension Fund and other group companies have been permitted to acquire an “aggregate holding” of up to 9.5 percent of IndusInd Bank’s paid-up share capital or voting rights.
The development comes at a difficult time for IndusInd Bank, which reported its largest-ever quarterly loss for the three months ended March 31. The loss followed a $230 million hit to its accounts arising from governance and accounting failures, particularly linked to lapses in its derivatives portfolio.
The crisis led to the exit of former chief executive officer Sumant Kathpalia and deputy CEO Arun Khurana earlier this year. Investors have also criticised the bank’s board for weak oversight and delays in disclosing the accounting irregularities.
Earlier this year, IndusInd Bank announced plans to raise up to $3.47 billion and said its promoters would be allowed to nominate two directors to the board, as part of efforts to stabilise operations and restore investor confidence.
The RBI approval for HDFC Bank’s entry as a significant shareholder is seen as a key development for IndusInd Bank as it navigates governance reforms and capital-raising plans amid heightened regulatory and market scrutiny.
