The Reserve Bank of India (RBI) has asked Housing Development Finance Corporation (HDFC) to reduce its stake in its insurance subsidiaries to 50% or below, says the mortgage lender in stock exchange filings.
HDFC owns a majority stake in both HDFC Life Insurance and HDFC Ergo General Insurance, reported Business Standard.

HDFC said the RBI had directed that, after the merger of HDFC Ergo Health Insurance with HDFC Ergo General Insurance, it had to bring down its stake in the merged entity to 50% or below within a period of six months from the date of the merger. After the merger, HDFC will hold a 50.58% stake in the merged entity. Clearance is awaited from the National Company Law Tribunal for the merger.

HDFC has to pare its 51.43% stake in its life insurance subsidiary, HDFC Life, to 50% or below by 16 December.

“We presume the communication is in line with the RBI not wanting NBFCs to hold more than 50% in insurance companies. Therefore, in HDFC Life, we have to pare 1.43%, and in HDFC Ergo, we have to pare only 0.58%,” said Keki Mistry, vice chairman and chief executive of HDFC.

According to RBI norms, the maximum equity contribution a NBFC can hold in an insurance company shall normally be 50% of the paid-up capital of the insurer.



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