India’s insurance regulator has advised insurers against loading up on the bonds of HDFC Group companies, saying details on permitted exposure thresholds must await the effective amalgamation date for what’s billed as the country’s biggest merger.
Early April, mortgage lender Housing Development Finance Corp (HDFC) proposed the merger with HDFC Bank. After the announcement, insurers wrote to their regulator IRDAI on the permitted exposure limits in the individual entities.
“IRDAI shall be issuing necessary instructions on applicability of exposure norms only after the announcement of the effective date of the merger,” IRDAI said in its note to the insurers. ET has seen a copy of that note.
Some investors were seen buying bonds of the HDFC Group, anticipating regulatory clearance that could open up additional limits on the holdings in individual companies. The regulator appears to have advised insurers against such a practice.
“Investment committees of insurance companies are hereby advised to take note of the above (the reference to the effective merger date) and take further exposure to the above entities considering the proposed amalgamation without pre-empting any regulatory relaxations for complying with extant regulations applicable to exposure norms,” IRDAI said in the note bearing the subject line “Merger of HDFC Ltd and HDFC Bank Ltd – Reg.”
