Two people familiar with the dialogue between the RBI and HDFC Bank said that communication continues regarding the matter, which has key implications for permissible exposure limits of insurance companies’ debt investments.
“There have been some more clarifications sought by the regulator as recently as July which have been answered. Now the bank is waiting for any communication from the RBI. Since this is a regulatory issue there is no set timeline,” one of the persons said.
Emails sent to the RBI and HDFC Bank did not receive responses till press time.
ET had reported on June 19 that HDFC had sought RBI approval to classify its outstanding loan-term bonds, with a tenure of more than seven years, as infrastructure bonds once it merges with HDFC Bank. July 13 was set as the record date for the merger between HDFC and HDFC Bank.
The erstwhile HDFC had about ₹1.20 lakh crore of bonds classified as infrastructure finance instruments. If these bonds are also given the infrastructure tag in the bank they can be set off against infrastructure and affordable housing loans of the merged entity without maintaining CRR (Cash Reserve Ratio) and SLR (Statutory Liquidity Ratio) on them.
HDFC on its own had about Rs 1 lakh crore of affordable housing loans and this would totally offset against them. Market participants said that close to 1 lakh crore worth of HDFC debt with the infrastructure tag were held by insurance companies.
REQUEST TO IRDAI
Insurers are said to have requested the Insurance Regulatory and Development Authority of India to “grandfather” their investments in HDFC bonds, a move that would permit the holding of such debt over the mandated limits for some time. Two insurance executives said on condition of anonymity that the request to the IRDAI was to permit an extended timeline of at least two years. The insurance regulator, which is yet to respond , is said to have informed insurers to manage their exposure ahead of the merger.