HDFC HDFC Bank merger: Mutual Funds hit SEBI limit with 60 schemes
– As per reports, at least 60 equity mutual fund schemes have exceeded the prescribed limit of 10% exposure in both HDFC Bank and HDFC, ahead of the HDFC Bank and HDFC merger.
– The merger is expected to be completed in the coming weeks, making it the country’s second-biggest financial institution after State Bank of India.
– The market regulator SEBI is not expected to give any exemption to mutual funds that exceed the prescribed limit, putting pressure on them to reduce their holdings within the given time frame.
– If mutual funds fail to comply, they may face regulatory action, which could impact stock prices.
– According to sources, mutual funds have 30 days to rebalance their portfolios, which can be extended to 60 days in such situations.
– The merger has led to the current situation, where mutual funds may end up holding more than the prescribed limit in the merged entity.
Options available with mutual funds
– In case mutual funds do not adhere to the prescribed limit, SEBI may consider it as a “passive breach”, as the rules have not been deliberately broken.
– Mutual funds have sent their case to the Association of Mutual Funds in India (AMFI), seeking guidance on the situation.
– If the situation has a wide impact on the market, regulatory action may be required, but currently, the situation does not warrant it.
The HDFC Bank and HDFC merger is expected to be completed soon, but mutual funds exceeding the prescribed limit is causing concern. The situation may compel mutual funds to rebalance their portfolios within the given time frame to comply with SEBI’s regulations. The AMFI will provide guidance on the situation, and SEBI may consider it as a passive breach, provided the mutual funds do not deliberately break the rules.
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