Fair trade regulator Competition Commission of India (CCI) has approved the merger proposal of HDFC Bank and its parent HDFC Ltd.

The proposed combination envisages the merger of HDFC Investments and HDFC Holdings with HDFC Ltd in the first step and subsequently, the merger of HDFC Ltd into HDFC Bank.

In a tweet on Friday, CCI said it has approved the "proposed combination involving amalgamation of HDFC Limited, HDFC Bank, HDFC Investments and HDFC Holdings."

Earlier, the Reserve Bank of India (RBI) approved HDFC Bank's merger proposal with its parent.

HDFC has also filed an application with the National Company Law Tribunal (NCLT) for merger of HDFC Investments and HDFC Holdings with HDFC Bank.

In April this year, HDFC Bank and HDFC Ltd announced the merger proposal under which the bank will take over the mortgage lender for about USD 40 billion in around 18 months.

Deals beyond a certain threshold require approval from the CCI, which keeps a tab on unfair business practices in the marketplace.