27-Jan-2024
2 mins read
India’s largest private sector lender HDFC Bank said on Thursday, January 25, 2024 that RBI has allowed Life Insurance Corporation (LIC) to raise its stake to 9.9% within this year in the bank.
Furthermore, LIC must ensure that its total holdings in the bank should not exceed 9.9% of the paid up share capital and voting rights. Currently, LIC holds 5.19% stake in the Bank so possibly LIC will soon buy HDFC Bank shares to increase its holdings.
India’s Central Bank, RBI has approved the LIC’s application on Thursday, subject to its compliance with the provisions of the Banking Regulations Act, 1949, RBI’s Master Direction on Guidelines on Acquisitions and Holding of Shares, Foreign Exchange Management Act, 1999 and the regulations issued by market regulator SEBI.
LIC Got Green Signal From RBI
In May last year, RBI granted a similar approval to the SBI Fund Management Limited proposal to acquire 9.9% stake in HDFC Bank. Now, in this year another public sector giant LIC showed its interest in the Bank and got a green signal.
For your information, Under RBI regulations, any company looking to buy a major shareholdings in any Bank should seek an approval of the regulator. Major shareholdings means total holdings of 5% or more of paid-up share capital or voting rights in the Bank.
After the merger of HDFC and HDFC Bank, LIC stake has exceeded 5% of holdings. So, LIC gave a proposal to increase its holdings further, which now got RBI’s approval.
How HDFC Bank Share Price May React?
This news can be very positive for the HDFC Bank long term investors and might also provide stability to its share price.
In the last two weeks HDFC Bank’s stock price corrected 13% approximately. Due to that, huge short positions build-up in the Bank’s derivatives. However, the recent news may raise concern to the overnight derivative short sellers.
The share price of HDFC Bank on Thursday, January 25, 2024 closed the session at Rs 1,434.90 with a decline of 1.44%.
Moreover, the LIC share price has also dropped -0.41% and closed at Rs 903.50 per share. It will be interesting to see how prices of both stocks react in the upcoming trading session.