The Reserve Bank of India (RBI) has approved HDFC Bank’s group entities to acquire up to a 9.5% aggregate stake in IndusInd Bank, with the approval valid until 14 December 2026. The development has drawn attention across the banking and investment community as IndusInd Bank deals with governance and asset quality challenges.
This article explains what the RBI approval permits, whether HDFC Bank will invest directly or only through its group entities, how the market is likely to view this development, and the key factors investors should track in the coming quarters.
Table of Contents
- RBI Approval: Key Details at a Glance
- HDFC Group Investment Structure
- Regulatory Background Behind the RBI Approval
- Existing HDFC Group Exposure to IndusInd Bank
- IndusInd Bank: Current Financial and Operational Challenges
- Stock Performance Comparison: HDFC Bank vs IndusInd Bank
- What This Means for Investors
- Key Risks and Factors to Monitor
- FAQs on HDFC Group’s Stake in IndusInd Bank
On 15 December 2025, the RBI approved HDFC Bank’s group entities to acquire up to 9.5% aggregate stake in IndusInd Bank.
Key conditions of the approval:
- Validity: Until 14 December 2026
- Maximum holding allowed: 9.5% at all times
- Any fall below 5% requires fresh RBI approval
- Stake acquisition must be completed within one year
This approval is regulatory, not promotional. It allows flexibility but does not mandate immediate buying.
A crucial clarification for investors is that HDFC Bank itself will not invest directly in IndusInd Bank shares.
Instead, investments may be made as part of routine operations by HDFC Group subsidiaries, such as:
- HDFC Mutual Fund
- HDFC Life Insurance
- HDFC ERGO General Insurance
- HDFC Pension Fund Management
- HDFC Securities
For HDFC Bank shareholders, this limits direct balance sheet risk while still allowing group-level exposure.
Under RBI regulations, any banking group approaching or crossing the 5% ownership threshold in another bank requires prior approval.
HDFC Group entities were already nearing this limit through mutual fund holdings. The fresh approval:
- Prevents regulatory breaches
- Enables gradual accumulation if deemed attractive
- Signals RBI’s comfort with HDFC Group as a long-term institutional investor
Notably, a similar approval in 2024 lapsed without full utilisation, highlighting that approval does not guarantee execution.
As of December 2025:
- HDFC Mid-Cap Opportunities Fund holds 4.03% stake in IndusInd Bank
- This stake is valued at approximately ₹2,668 crore
- Mutual funds collectively own around 23% of IndusInd Bank
This makes mutual funds the single largest institutional ownership block, reinforcing the importance of governance and asset quality improvements.
IndusInd Bank is undergoing one of its most difficult phases in recent years.
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Financial Stress Indicators
- IndusInd Bank reported its largest quarterly loss in Q4 FY25 due to accounting discrepancies.
- Q4 FY25 Net Loss: ₹2,239–₹2,329 crore (consolidated), driven by ₹1,960 crore write-off of notional derivative profits since FY16, plus microfinance misreporting and unsubstantiated balances totalling over ₹2,500 crore reversed.
- Gross NPAs: 3.13% as of March 31, 2025 (up from 1.92% YoY).
- Net NPAs: 0.95% (up from 0.57% YoY), with stress concentrated in microfinance and vehicle finance.
- These reflect suspected internal fraud reported to regulators.
Profitability Pressures
- Profitability deteriorated amid rising slippages and credit costs.
- Q3 FY25 Net Profit: Down 39% YoY to ₹1,402 crore, with NII flat at ₹5,228 crore and provisions up 80% to ₹1,743 crore.
- Slippages: Q3 at ₹2,200 crore (mostly consumer books, ₹695 crore from microfinance); cumulative stress reached ₹25,700 crore across stressed portfolios by year-end estimates.
Key Stress Areas:
- Microfinance: Misclassification resulted in ₹1,885 crore in under-provisioning.
- Vehicle finance: Elevated credit costs persisting into FY26.
FY25 overall profit fell 71% to ₹2,576 crore.
| Metric |
HDFC Bank |
IndusInd Bank |
| Recent Price (Dec 2025) |
~₹995 (down 0.10%) |
~₹845 (down 0.73%) |
| 1-Year Return |
+7.09% |
-27% |
| Latest Quarterly Profit Growth |
+20.62% YoY (₹19,611 crore) |
Recovery phase |
| Market Capitalisation |
₹15.32 lakh crore |
₹59,993 crore |
Both stocks dipped slightly after the approval announcement, indicating that markets are waiting for execution clarity rather than reacting emotionally.
To evaluate IndusInd Bank’s recent stock movement amid earnings pressure, track the IndusInd Bank share price, historical trends, and valuation indicators.
For HDFC Bank Investors
- No direct investment risk on HDFC Bank’s balance sheet
- Exposure remains indirect and diversified
- Reinforces HDFC Group’s role as a long-term institutional stabiliser
Want to analyse how HDFC Bank’s stock has held up amid sector-wide volatility? Review the HDFC Bank share price with updated charts and key valuation metrics.
For IndusInd Bank Investors
Entry of HDFC Group entities can improve:
- Governance perception
- Institutional confidence
- Long-term capital stability
Short-term volatility is likely due to weak earnings visibility. Long-term upside depends on the successful execution of recovery plans.
This is not a turnaround confirmation, but it is a confidence signal from a highly trusted banking group.
Investors should closely track:
- Pace and extent of actual stake build-up by HDFC entities
- IndusInd Bank’s Q3 and Q4 FY26 results
- Movement in NPAs and credit costs
- RBI or regulatory observations
- Progress towards the 1% RoA target
Failure to deliver on asset quality improvements could delay recovery despite institutional backing.
1. Is HDFC Bank buying shares of IndusInd Bank directly?
No. HDFC Bank will not invest directly. Only HDFC Group subsidiaries may invest as part of their routine portfolio management.
2. Why is RBI approval important in this case?
RBI approval is mandatory once a banking group’s stake approaches or exceeds 5% in another bank. It ensures regulatory oversight and ownership transparency.
3. Does this mean IndusInd Bank is safe now?
Not immediately. The approval signals institutional confidence, but IndusInd Bank still faces asset quality and profitability challenges that need time to resolve.
4. How much stake can HDFC Group acquire?
The group can hold up to 9.5% aggregate stake, subject to continuous compliance with RBI norms.
5. Should retail investors buy IndusInd Bank shares now?
This depends on risk appetite. Conservative investors may wait for clearer earnings recovery, while long-term investors may track governance and asset quality improvements before taking exposure.
6. What is the biggest risk to IndusInd Bank’s recovery?
High NPAs, elevated credit costs, and execution risk in reducing microfinance exposure remain the biggest challenges.