The Competition Commission of India (CCI) has said the combination is "not likely to have an appreciable adverse effect on competition in India".
Dewan Housing Finance Corporation (DHFL) and First Blue Home Finance are engaged in business of housing finance while DHFL Holdings Private Ltd (DHPL) is an investment firm.
In an order dated December 13, CCI noted that DHPL and First Blue are subsidiaries and "the control over the actitvities carried on by First Blue and DHPL, before the combination, is with DHFL and will continue to remain with DHFL after the proposed combination".
"In view of the foregoing, the proposed combination does not give rise to any adverse competition concerns in India," CCI noted.
DHFL indirectly holds 67.56 per cent in First Blue through its wholly-owned subsidiary DHPL.
Meanwhile, CCI has decided to initiate a "separate proceeding regarding imposition of penalty" under Competition Act since the three companies submitted notice seeking approval much late after their respective boards approved the deal.
The Board of Directors of each of the parties to combination cleared the combination scheme on September 28, 2011 but the notice for approval was submitted only on November 19, 2012.