China's central bank raises stake in HDFC to more than 1%; govt concerned as no red flag raised on deal

China’s central bank, People’s Bank of China (PBOC), reportedly raised its stake in India’s mortgage lender HDFC to 1.01 percent from the existing 0.8 percent, said news reports. The report of POBC’s stake hike in HDFC reportedly raised concerns of the government though there is no rule to ban investment by any Chinese company in an Indian entity. [caption id=“attachment_5030051” align=“alignleft” width=“380”] File image of HDFC Chairperson Deepak Parekh. PTI[/caption] The People’s Bank of China had held 1.75 crore shares of HDFC as per the shareholding disclosures for the March quarter and it is not clear if the PBOC purchased the shares between January and March, said a report in The Economic Times. HDFC stock fell about 40 percent this year from a high of Rs 2,493 to a low of Rs 1,499 last week, the report said adding the stock jumped 14 percent last week to close at Rs 1,702 on Thursday. HDFC vice-chairman and CEO Keki Mistry said the PBOC has been an existing shareholder and had owned 0.8 percent in the company as of March 2019, reported ANI. “The disclosure has been made now since the stake has hit the 1 percent regulatory threshold. They have been accumulating the shares over a year and are now holding 1.01 percent,” added Mistry. The PBOC’s 1.01 percent consists of 17.49 million shares of HDFC. As per the norms, the companies have to disclose shareholding changes to the exchanges at the end of every quarter only if an investor’s stake crosses 1 percent. Meanwhile, the finance ministry is reportedly concerned over the move as no objection was raised on the Chinese central bank’s stake hike in the HDFC, said a report in Mint. It was not mandatory for HDFC to disclose the Chinese central bank’s 0.8 percent stake and when the stake holding crossed 1 percent threshold, the home loan lender complied with the regulations. Since, the deal was a secondary market transaction, HDFC had no role in it, the report said. “No less an institution than a central bank of the world’s second largest economy has bought a stake in one of India’s largest financial institutions. Normally, there would be no need for xenophobic hysteria over this but a central bank buying an equity stake in a commercial entity is unusual. No red flag was raised," a source was quoted as saying in the report. Foreign portfolio investors hold a 70.88 percent stake in the company. –With inputs from agencies