Hedge fund Route One Investment Company will be doubling its stake in IndusInd Bank to 10 per cent, the private sector lender said on Friday.

The hedge fund has received a nod from the Reserve Bank of India for the same, the bank said, without specifying how and by when the stake would be increased.

The move comes at a time a slew of lenders, especially the private sector ones, have started efforts to bolster their capital reserves by raising new capital fearing a spike in non performing assets because of the Covid-19 pandemic.

Route One, which owns a 4.96 per cent stake in the bank, had approached the RBI to increase the stake to 10 per cent in accordance with the master directions and the central bank made a reference on the same to Indusind, it said.

Friday’s intimation from Indusind said the RBI has forwarded it a copy of the letter addressed to the hedge fund “granting approval for increasing their shareholding up to 10 per cent of the paid-up voting equity capital”.

According to a report earlier this month, the bank may be looking at a preferential issue of shares to raise the capital and it can be a wider fund raising exercise which can see participation from more entities as the bank seeks to build buffers.

In March, there was a media report saying the bank’s promoter Hinduja Group has sought to increase its stake to 26 per cent from the present cap of 15 per cent, after the concession granted to Kotak Mahindra Bank’s promoter Uday Kotak.

Indusind Bank scrip closed at Rs 522.20 apiece on the BSE, up 1.61 per cent.