RBI Allows HDFC Bank to Buy 9.5% Stake in Rival IndusInd Bank

India’s largest private lender, HDFC Bank, on Monday announced that the Reserve Bank of India (RBI) has allowed it to acquire up to a 9.5% stake in rival IndusInd Bank. The approval covers HDFC Bank group entities, including HDFC Mutual Fund, HDFC Life Insurance Company Limited, HDFC ERGO General Insurance Company Limited, HDFC Pension Fund Management Limited and HDFC Securities Limited.

The approval is valid for one year from the date of the RBI’s letter, that is, until December 14, 2026.

“The Bank needs to ensure that the aggregate holding in IndusInd does not exceed 9.5% of the paid-up share capital or voting rights of IndusInd at all times,” HDFC Bank said in an exchange filing.

The filing added that while the Bank itself does not plan to invest in IndusInd Bank, the combined shareholding of HDFC Bank group entities is likely to exceed the 5% threshold. As a result, an application seeking RBI approval to increase the investment limit was submitted on October 24, 2025, on behalf of the group entities, in line with RBI directions.

The investments by HDFC Bank group entities are part of their normal course of business.

Under the RBI’s 2025 directions on banks’ acquisition and holding of shares, “aggregate holding” includes shares held by the bank as well as other entities within the same group, such as group companies, mutual funds, trustees and promoter group entities.

Following the announcement, shares of both lenders declined in early trade on December 16. HDFC Bank was down 0.24% at ₹993.70, while IndusInd Bank fell 0.68% to ₹845.50 on the NSE at 11.00 am.

According to September quarter shareholding data, HDFC Midcap Fund, a scheme of HDFC Mutual Fund, held a 4.03% stake in IndusInd Bank, valued at about ₹2,668 crore based on Monday’s closing price. Taken together, mutual funds own nearly 23% of the bank’s equity. Other key institutional investors include the Government of Singapore, Government Pension Fund Global, BNP Paribas and LIC.

IndusInd Bank has remained under pressure after governance and accounting lapses surfaced earlier this year. These issues resulted in a record quarterly loss in the March quarter. The developments led to the exit of then CEO Sumant Kathpalia and deputy CEO Arun Khurana, and drew criticism from investors over board oversight and delays in disclosing losses linked to the bank’s derivatives portfolio.

Earlier, IndusInd Bank announced plans to raise up to $3.47 billion and allow its promoters to appoint two nominees to the board, as part of steps aimed at strengthening its capital base and restoring investor confidence.