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HDFC Bank’s Merger with HDFC to Aid Credit Growth in India

Industry: Financial Services
Current: Company Performance

The proposed merger of HDFC Bank with parent HDFC received a nod from stock exchanges, the Reserve Bank of India, and PFRDA
The merger is yet to receive approval from the Competition Commission of India (CCI), the National Company Law Tribunal (NCLT), and the shareholders and creditors of both entities
The merger will allow the bank to increase its home loan portfolio, while HDFC will be able to access funds at a lower cost

The proposed merger of HDFC Bank and parent company HDFC is expected to lead to a substantial balance sheet that could support significant exposure and aid credit development in the Indian economy. According to HDFC Bank’s chairman Atanu Chakraborty, the robust distribution network to be created by the merger would help the housing financing industry broaden its reach.

Approval Status

Two days after obtaining approval from BSE Limited and National Stock Exchange Ltd., HDFC Bank received the go-ahead from the Reserve Bank of India for its merger with mortgage lender HDFC. The proposal for merger also received approval from the Pension Fund Regulatory and Development Authority (PFRDA). The National Company Law Tribunal (NCLT), the Competition Commission of India (CCI), and the shareholders and creditors of both firms are yet to approve the merger.

Deal Rationale

The merger of HDFC Bank and parent HDFC will result in a huge balance sheet that could support significant exposure and augment credit development in the Indian economy. HDFC would be able to increase its exposure and eye stronger credit growth in the economy with a bigger and more solid balance sheet. The merger will also likely result in a robust distribution network, which could contribute to the expansion of the housing finance industry.

Housing Finance: Future Ahead

In India, housing finance can be obtained from banks and housing finance companies. Housing finance companies (HFCs) dominate the Indian housing industry, with the majority of them being publicly owned businesses. In the past decade, real estate costs increased significantly in the five major urban areas. In the next 10 years, housing financing is expected to contribute substantially to growth in India's GDP.

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