Kumud Das Mumbai

LIC has received the RBI’s approval to increase its holding in HDFC Bank to up to 9.99 per cent from its current holding of 4.11 per cent.

HDFC Bank has recently been in the news, with the reasons therefor already in the public domain, along with the frenzied discussions accompanying them. That said, it is also a Systemically Important Bank, or SIB, which implies a sovereign backstop if such an eventuality were to be triggered. Therefore, a government-owned institution with deep pockets has obviously been nudged to increase its stake with all the appropriate and mandatory approvals.

Talking to Bizz Buzz , Hariharan MV, former SBI Treasury head, said, “The signals are a strong message to reassure skittish investors and the general public about how authorities are having oversight and supervising the workings of the Bank.”

It might also be a long-term punt to enable LIC to reap likely benefits. HDFC Bank management, too, is being directed to get its act together, since reputations and public confidence need some burnishing, he said.

As LIC already has a 49 per cent stake in IDBI Bank, it cannot have a stake of more than 10 per cent in any bank.

“This is why LIC has kept its stake much less than 10 per cent in another private sector lender, Yes Bank,” said a former senior official of LIC, requesting anonymity.