Solution

As per the information given below, the correct answer is option C. The Reserve Bank of India (RBI) has given HDFC Bank three years to comply with the priority sector lending norms (PSL) following its merger with HDFC Ltd (HDFC), though no relaxation is allowed for abiding by the cash reserve ratio and statutory liquidity ratio rules. According to RBI norms, commercial banks need to extend 40 per cent of the adjusted net bank credit (ANBC) of the previous year towards the priority sector. The RBI has allowed HDFC Bank to consider a third of the outstanding HDFC loans in the first year of the merger. The remaining two-thirds of the portfolio of HDFC will be considered over the next two years equally. Effectively, HDFC Bank has to comply with the first year’s target, one year after the effective date of the merger. “The requirement for PSL (complying with priority sector lending norms) kicks in 12 months later,” Srinivasan Vaidyanathan, HDFC Bank’s chief financial officer (CFO), said in a call with analysts.