Deepak Parekh Says HDFC-HDFC Bank Merger Will Not Impact Employees Of HDFC

HDFC board has approved the merger of its wholly-owned arms HDFC Investments and HDFC Holdings with HDFC Bank. The merger process is expected to be completed by the second or third quarter of FY24

Deepak Parekh said the combined balance sheet of the merged entity will be Rs 17.87 lakh crore and the net worth will be Rs 3.3 lakh crore. Image: AFP

New Delhi: HDFC Chairman Deepak Parekh, who has termed the merger between HDFC and HDFC Banks as one of equals, said it will not impact employees of HDFC, which is set to be merged into HDFC Bank.

On Monday, Housing Finance company announced that it will acquire 41 per cent stake in India's biggest private sector lender, HDFC Bank, through the transformational merger.

The board of HDFC has approved the merger of its wholly-owned subsidiaries HDFC Investments and HDFC Holdings with HDFC Bank. The merger of HDFC and HDFC Bank is expected to be completed by the second or third quarter of FY24.

Parekh, in a news meet in Mumbai on Monday, said the amalgamation will take between 12-18 months. He said harmonisation of rules between banks and non-banks which reduces the regulatory arbitrage was one of the key factors which influenced the decision for merger between the largest home financier and HDFC Bank.

He noted that requirements like non-performing asset recognition being at par and size-based regulations for non-bank finance companies are among the changes in landscape.

Addressing a press conference after the surprise announcement earlier in the day, Parekh said being a housing finance company, HDFC does not have priority sector loans mandate, and is not required to comply with statutory liquidity ratio or cash reserve ratio mandates for its liabilities.

Therefore, an application for some leeway, where the RBI can grant time for those parts of the assets and liabilities to match up has been made to the central bank, he said.

Parekh said he is confident that the regulators will approve the merger scheme announced earlier in the day.

Now, the combined balance sheet of the merged entity will be Rs 17.87 lakh crore and the net worth will be Rs 3.3 lakh crore, according to Parekh.

Keki Mistry, the vice chairman and chief executive of HDFC who was present at the news meet, said a merger was possible ‘theoretically’ and could be done at an appropriate time.

It can be noted that talks of a merger between the two entities had been floating for long, but people pointed to advantages of continuing as separate entities till the notification on infrastructure bonds came in.

According to a report by the PTI, HDFC Bank has been sourcing home loans for its mortgage financier parent and earning fees and commissions against it every quarter. A nominee of HDFC, which owns over 21 per cent in HDFC Bank, sits on the board of what has now become the largest bank in the private sector.

While both the lenders operate as independent entities, there were speculations of some quibbles at the time of choosing a successor to Puri. However, Puri had himself come out to say that there were no differences between Parekh and him over who would lead the bank.