India’s largest private lender HDFC Bank has announced that it has agreed to take on the largest home mortgage lender in a deal worth around $40 billion. This would create a financial giant considered to be the biggest deal in India’s corporate history. The combined asset base of the proposed unit will be around Rs 18 lakh crore. HDFC-HDFC Bank Merger The project is expected to be completed by the second or third quarter of FY24, subject to regulatory approvals.
HDFC-HDFC Bank merger: How customers will be affected
customers of HDFC Ltd and HDFC Bank Both organizations will receive combined benefits, including savings accounts, mortgages, life insurance, health insurance, general insurance, investment products, credit cards and personal loans.
“As per the management, about 70 per cent of HDFC Bank’s 68 million customers do not have housing loans, and thus the merger will provide an opportunity to sell mortgage loans, while offering banking products to HDFC Ltd customers. The cost advantage of HDFCCB will make the housing loan business more competitive amid increasing dominance of banks in this segment,” Emkay Global Financial Services said in a research note.
HDFC-HDFC Bank Merger Will help expand customer base and build product portfolio in the home loan category. “HDFC Bank’s debt is expected to grow by 42 per cent to around Rs 18 lakh crore and increase the market share to around 15 per cent from the current 11 per cent,” said Manoj Dalmiya, Founder and Director, Proficient Equities Ltd. This means that new home loan customers can get loans at a lower interest rate than existing customers after the completion of the merger. For existing loan account holders, a change in operating activities is also expected, but the same is likely to be implemented only after the merger is done.
On the other hand, deposit interest rates are unlikely to be affected by existing customers as the interest rates are kept unchanged till maturity. However, most analysts said that since the amalgamation is 12 to 18 months away, it is difficult to predict the exact impact on customers.
HDFC-HDFC Bank Merger Deal
The move was unexpected and took everyone by surprise, with markets thumping for the merger as it skyrocketed on Monday. According to most analysts, the move will prove beneficial for everyone from customers to investors and the banking system as a whole.
Under the proposed deal, each share exchange ratio of HDFC Bank will be 42 equity shares for every 25 equity shares held in HDFC Ltd. “…the Audit Committee and the Committee of Independent Directors, after considering the recommendation and report of the Board of Directors, of HDFC Bank in its meeting held on the 4th April, 2022, in Housing Development Finance Corporation Limited (HDFC Limited) and its approved a holistic scheme of amalgamation with HDFC Investments and HDFC Holdings; and HDFC Ltd into HDFC Bank, and their respective shareholders and creditors,” HDFC Bank said in a filing on Monday.
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