In a significant regulatory development, the Reserve Bank of India (RBI) has given its nod to HDFC Bank to increase its aggregate stake in fellow private sector lender IndusInd Bank. The central bank's approval allows HDFC Bank to hold up to 9.5% of IndusInd Bank's paid-up share capital or voting rights.
Details of the Regulatory Approval
The approval, which was officially dated December 15, 2025, was disclosed by IndusInd Bank through a regulatory filing to the stock exchanges on Tuesday. This move falls within the established regulatory framework that governs significant shareholding in banking institutions. The permission effectively raises the ceiling from the existing 5% to the new limit of 9.5% on an aggregate basis.
However, HDFC Bank was quick to clarify its role in the matter. A bank spokesperson stated that while the RBI approval was granted to HDFC Bank as the regulated banking entity representing its group companies, HDFC Bank itself does not intend to make any direct investment in IndusInd Bank. The proposed investments will be executed by specific group companies of HDFC Bank.
Investment Route and Market Perception
According to the clarification provided, the actual investments will be carried out by HDFC Bank's group companies, which were listed in the stock exchange filing. A spokesperson added, "These investments would be made by the respective companies in their normal course of business and from the open market."
Sources familiar with the matter indicate that the RBI's approval is primarily intended to facilitate portfolio investments by entities within the HDFC group. These entities are largely expected to be its mutual fund and insurance arms. Market analysts and participants largely interpret this potential holding as a financial investment rather than a strategic move towards a takeover. Stringent RBI norms on ownership concentration and exposure limits make any acquisition-style transaction highly improbable.
Implications for the Banking Sector
This development highlights the role of large banking groups in making financial investments in other banks through their non-banking affiliates. The approval enables HDFC Bank, in its capacity as the sponsor and promoter of its extensive financial services group, to consolidate a stake of up to 9.5% in IndusInd Bank. This is seen as a routine portfolio adjustment by institutional investors rather than a precursor to a merger or acquisition, given the regulatory landscape designed to prevent undue concentration of power in the banking system.
The news has sparked interest in banking sector stocks, with market watchers observing the flow of institutional funds. The move underscores the growing interlinkages between large financial conglomerates in India and their investment strategies within the regulated banking space.
