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Journalism of Courage
Written by Piyush Shukla
In some relief for HDFC Bank and HDFC, the Reserve Bank of India has allowed the bank to meet priority sector lending requirements after the merger with HDFC in a gradual manner, up to three years.
The RBI said the adjusted net bank credit may be calculated considering one-third of the outstanding loans of HDFC as on the effective date of the merger for the first year. The remaining two-thirds of the portfolio of HDFC will be considered over a period of next two years equally, the lender informed the exchanges on Friday.
Under the current rules, a banking entity needs to lend 40 per cent of the adjusted net bank credit to the so-called priority sector or economically weaker sections such as agriculture and micro-enterprises.
However, HDFC Bank will have to comply with regulatory requirements for cash reserve ratio (CRR), statutory liquidity ratio (SLR) and liquidity coverage ratio (LCR) after the merger. Analysts say this may affect the merged entity’s profits for the first year of operations. Currently, SLR is at 18 per cent and CRR at 4.5 per cent.
While announcing the merger in April last year, HDFC chairman Deepak Parekh said HDFC Bank had requested RBI for a phased-in approach in respect of SLR and CRR, and priority sector lending, etc.
Also, on Friday, SEBI approved the proposed change of controlling stake in HDFC AMC to HDFC Bank as part of the scheme of amalgamation.
