Insurance regulator relaxes norms for investments in HDFC

economictimes.indiatimes.com:

HDFC Bank after last month's merger with its mortgage-financier parent, while also allowing insurance companies to treat long-term bonds sold by HDFC as housing and infrastructure bonds until those outstanding instruments mature. The Insurance Regulatory and Development Authority of India (IRDAI) Friday clarified that the bonds/debentures held by the insurers in HDFC Ltd on the date of announcement of the merger, which is April 4, 2022, will be under the category «Housing and Infrastructure» and treated as investments in this category until maturity of the respective instruments.

Also, the regulator exempted insurers from complying with the single investee equity exposure norms for individual segregated funds with respect to shares of HDFC Bank (post-merger) until June 30, 2024. IRDAI has said that the exemption will only be with respect to holdings of the respective insurers as on June 30, 2023, and will be scaled down to the extent of sale of shares thereafter.

The clarification comes after insurers asked IRDAI to allow investments in HDFC bonds to be continued to be classified under the Housing and Infrastructure sector after the merger. Insurers had also urged the regulator to exempt the single investee equity exposure limits prescribed for segregated funds of ULIP with respect to investments in the post-merger equity shares of HDFC Bank.

Insurers see it as a big relief as the infrastructure investments in HDFC bonds, clubbed with investments made in HDFC Bank equity due to merger of these two institutions, resulted in automatic involuntary breach of single investee company limits. The investment cap for infrastructure and housing is a minimum 15% while cap for single investee company equity is 10% While HDFC bonds