MUMBAI: The Reserve Bank of India (RBI) has allowed HDFC Bank to hold commercial papers issued by HDFC Ltd. The central bank asked the lender to not roll over or re-issue commercial papers issued by HDFC after the effective merger date. The private lender, on April 20, had sought clarification about commercial papers in light of its planned merger with the mortgage lender.
“The RBI has, vide its email dated June 16, 2023, advised HDFC Bank that it may hold the commercial papers that were issued till date by HDFC Limited, till their maturity, and that it shall not roll over or reissue any commercial paper after the effective date of the Proposed Amalgamation (Effective Date),” HDFC Bank said in a regulatory filing to the Bombay Stock Exchange.
It will also approach the RBI with the crystalised amounts of all the liabilities of HDFC Limited as of the Effective Date, said the lender. The merger of HDFC Bank with a mortgage lender is expected to be completed by the end of next month.
HDFC Ltd had received approval letters from RBI, Securities and Exchange Board of India, Pension Fund Regulatory and Development Authority (PFRDA) and the Competition Commission of India as well as from India’s stock exchanges BSE and the National Stock Exchange.
The merger, which was announced in April last year, will see HDFC’s operations merged within the bank, creating a new financial sector behemoth. The housing finance portfolio will strengthen HDFC Bank’s retail book and allow the lender to tap into a customer base that has largely remained untapped. After the merger, HDFC Bank will be 100% owned by public shareholders, and existing shareholders of HDFC will own 41% of the bank.
The merger of HDFC twin will pave the way for a financial giant with a balance sheet of `18 lakh crore. After the merger, HDFC Bank will remain the second-largest bank in India but it will be twice the size of its rival ICICI Bank. The merger viewed as the largest in Indian corporate history is valued at over
$40 billion.