To form a financial services behemoth, India’s largest private lender HDFC Bank will combine with HDFC Ltd, the country’s largest home financing provider. Today we will describe about HDFC merger’s effect on the customers.
Benefits from this one-of-a-kind combination might be in both directions. Firstly, funding costs are anticipated to fall, which may be passed on to mortgage customers, further solidifying the company’s position in the market. Secondly, the company will also benefit from increased efficiency as a result of activity streamlining and cost rationalization.
Some experts, however, are concerned that the Reserve Bank of India’s statutory liquidity ratio, cash reserve ratio, and priority sector lending requirements may have an immediate impact on the merged entity’s profitability. According to a study by Macquarie Capital Securities, HDFC Bank will need Rs. 70,000 to Rs. 80,000 crores to meet SLR/CRR requirements, and Rs. 90,000 crore to meet priority sector standards.
HDFC Ltd shareholders would receive 42 shares of the bank in exchange for their 25 shares. The existing shareholders will own 41% of HDFC Bank. HDFC Bank will become a fully public corporation after the home finance business’s shares in the lender are cancelled.
The merger of India’s largest housing finance company, HDFC Limited, with HDFC Bank will enable seamless delivery of house loans to its client base of over 68 million. This will improve the speed of credit development in the economy, according to HDFC Bank. HDFC Ltd and HDFC Bank will continue to function as distinct organizations until the merger comes into effect, which is expected to take 12-18 months.
“Post the combination, HDFC Bank’s customers will be offered mortgages as a core product in a seamless manner. HDFC Bank will also leverage the long tenor mortgage relationship to offer varied credit and deposit products enabled through better insights throughout the customer life-cycle,” said a statement issued by the bank.
The merger is said to be an outcome of the larger trend of consolidations in the financial industry. The first phase of public-sector bank consolidation has already occurred, prompted in part by the need to strengthen balance sheets. Citibank’s consumer division in India was recently bought by Axis Bank.
“The resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector, including credit to the agriculture sector,” said Deepak Parekh, Chairman HDFC Limited.