Business News: The Reserve Bank of India (RBI) has granted HDFC Bank approval to acquire up to a 9.50% stake in AU Small Finance Bank (AU SFB) within one year of the approval letter’s date, failing which the approval will be void.

According to AU SFB’s regulatory filing, the RBI issued a letter dated January 3, 2025, addressed to HDFC Bank. The letter permits HDFC Bank and its group entities—including HDFC Mutual Fund, HDFC Life Insurance, HDFC Pension Management, HDFC ERGO General Insurance, and HDFC Securities—to acquire up to 9.50% of AU SFB’s paid-up share capital or voting rights within one year. If this acquisition is not completed by January 3, 2026, the approval will automatically lapse.

In a separate announcement, HDFC Bank informed stock exchanges that it has also received RBI approval to acquire up to 9.50% aggregate holding in Kotak Mahindra Bank and Capital Small Finance Bank. This approval is valid for one year, expiring on January 2, 2026.

The RBI has mandated that HDFC Bank and its group entities ensure their combined holding does not exceed 9.50% of the paid-up share capital or voting rights in these banks at any time. As per the RBI Directions 2023, “aggregate holding” includes shares held by the bank, its affiliates, mutual funds, trustees, and promoter group entities.

Although HDFC Bank has no immediate plans to invest in these banks, its group’s collective holding could exceed the 5% threshold. To address this, HDFC Bank sought and obtained RBI approval to increase its investment limits.