HDFC merger gets partial rule waiver

Relief on priority sector lending; none on CRR, SLR, LCR

The Reserve Bank of India (RBI) has granted HDFC Bank several exemptions to smoothen its merger with Housing Development Finance Corp., but none on the critical reserve and liquidity ratios: the combined entity must adhere to them from Day One.

Banks are mandated to lend 40% of their loans as measured in terms of adjusted net bank credit (ANBC) to so-called priority sectors such as agriculture, housing and micro, small, and medium enterprises (MSMEs). ANBC is the net bank credit plus investments made by banks in non-SLR bonds. In an exchange notification, HDFC Bank said it had been informed that the combined entity must include one-third of HDFC’s loan book to calculate the priority sector lending (PSL) required at the end of the first year after the merger. Priority sector requirements on the rest of HDFC’s loan book can be met over the next two years.