HDFC-HDFC Bank merger : HDFC Bank is set to become India’s largest housing finance company with a market value of Rs 12.8 lakh crore with the merger of HDFC in an all-stock deal.
Industry experts as well as top management of HDFC and HDFC Bank believe that this merger is good news for both the companies, stakeholders, customers as well as the economy. However, HDFC’s depositors and borrowers have some apprehensions regarding their long-term contracts.
interests of customers
It may take 12 to 18 months for the merger to be completed, which makes it clear that till then the situation will remain the same. The proposal still needs the approval of the regulators. This includes RBI, SEBI, IRDA, PFRDA and CCI. Management has indicated that the merger may take effect in the third or fourth quarter of FY24.
HDFC Bank MD and CEO Shashidhar Jagadeesan told Moneycontrol, “Depositors of HDFC and HDFC Bank will continue to get the interest they are getting now. After the merger, the bank rates will be harmonised.
The challenge of meeting the regulatory standards for the merger of HDFC and HDFC Bank
At present, HDFC will pay an interest of 6.15-6.35 per cent per annum on deposits up to Rs 2 crore with tenor of two years and nine months. HDFC Bank gives 5.2-5.7 interest per annum for the same tenure.
change is easy
HDFC’s distributors said top distributors are in touch with them and changes are expected to be smooth.
Hainoj Patel, Pounder Partner, Power Pusher Financial Services LLP, said, “We are assured by HDFCFC that the management has assured smooth transition. Branches can be allotted to HDFC depositors on the basis of their existing addresses. Companies will work on logistics.”
Why there will be no promoter of HDFC Bank, 100% public shareholding after merger
Will external benchmarking system be adopted?
The home loan portfolio of housing finance company HDFC will go to HDFC Bank, a banking entity.
Even though RBI rules apply to both, the banking rules for retail home loans are different. The bank’s new floating rate retail loans (approved after October 1, 2019) have been linked to the external benchmark, which is the repo rate across most banks.
NBFC companies, on the other hand, currently do not link their retail loans to external benchmarks, though competition forces them to offer comparable rates.
Former bank official and financial counselor VN Kulkarni says, “As the combined entity would be a banking company, it would be subject to the regulatory framework of the bank. Therefore, the merged entity will be offered rates linked to the external benchmark. Existing HDFC customers may get an option to shift to the new arrangement post the merger.”
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