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

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the Reserve Bank of India (RBI) Asked HDFC Bank To continue to comply with regulatory requirements for the Cash Reserve Ratio (CRR), Statutory Liquidity Ratio (SLR) and Liquidity Coverage Ratio (LCR), without exception, following the merger of HDFC Limited.

after the mergeAsset classification for loans will continue in accordance with applicable standards for banks. The private sector lender said in the exchange filing that the investments, including subsidiaries and associates of HDFC, will continue as investments of HDFC Bank. HDFC Bank asked the Reserve Bank of India (RBI) to make some concessions in view of the merger, to which the regulator responded on April 20, granting some tolerances and clarifications.

The Reserve Bank of India (RBI) has allowed HDFC to calculate net bank credit adjusted for the purpose of Priority Sector Lending (PSL) targets, taking into account one-third of HDFC loans outstanding on the date of merger for the first year. The remaining portfolio will need to be considered at par over the next two years.

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The regulator has also allowed HDFC Bank, or HDFC, to increase their stakes in HDFC Life Insurance and HDFC ERGO General Insurance to more than 50 percent, prior to the effective date. HDFC Bank can also continue to hold HDFC’s stake in HDFC Education and Development Services for a period of two years. The stake in HDFC Credila Financial Services will have to be reduced to 10 percent within two years without acquiring new clients. The HDFC loan against shares for the promoter’s contribution, or above EGP 20,000 for individuals, will be allowed to continue until maturity.

Also read: HDFC Bank’s Q4 PAT was up 20% thanks to strong growth in NII

The bank said it would need to conduct a one-off mapping of HDFC borrowers to standards and spreads, as all HDFC retail, MSME and other variable rate loans would be tied to appropriate standards within six months of the merger.

HDFC Bank may approach the Reserve Bank of India (RBI) for certain clarifications in connection with this letter and will also communicate with the regulator regarding the crystallized amounts of liabilities as of the effective date.