Prior to the RBI's approval, LIC held a 5.19% stake in HDFC Bank. This means LIC can still acquire up to 4.8% additional shares.
LIC has been given one year, until January 24, 2025, to acquire the additional shares and reach the 9.99% limit.
Move could impact HDFC Bank's ownership structure
The increased stake could give LIC more influence over HDFC Bank's decision-making and ownership structure.
Potential benefits for LIC and HDFC Bank
The deal could benefit both LIC and HDFC Bank by providing LIC with greater diversification and HDFC Bank with a stable long-term investor.
Financial analysts are offering mixed reactions to the RBI's decision, with some expressing concerns about potential conflicts of interest and others seeing it as positive for both companies.
LIC will still need to comply with various regulatory requirements before it can acquire the additional shares.
HDFC Bank's share price rose following the RBI's approval, indicating positive investor sentiment towards the deal.
The long-term impact of the increased stake on both LIC and HDFC Bank remains to be seen.