Mumbai, Aug 20: Life Insurance Corporation of India (LIC) has received approval from the Reserve Bank of India (RBI) to increase its stake in HDFC Bank to up to 9.99 per cent, sending both stocks higher in early trade.
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HDFC Bank shares rose more than 1 per cent to around Rs 728, while LIC shares also traded higher following the announcement.
LIC currently holds 4.11 per cent of HDFC Bank’s total share capital. The RBI approval gives the insurer the option to increase its holding to nearly 10 per cent, subject to applicable regulatory requirements and conditions.
The approval was communicated through an RBI letter dated August 19, following LIC’s application to increase its holding in the private-sector lender.
The development was welcomed by the market, with investors viewing the approval as positive for HDFC Bank and LIC. However, the approval does not mean LIC will immediately increase its stake to 9.99 per cent.
HDFC Bank shares have been under pressure this year, making the positive market reaction to the LIC stake approval notable. The bank’s shares were trading close to their recent low levels before Thursday’s gain.
The RBI approval is subject to compliance with banking, foreign exchange, securities market and other applicable regulations.
The move gives LIC greater flexibility to increase its investment in HDFC Bank and further strengthens the insurer’s exposure to India’s banking and financial services sector.