Mumbai, April 4 : HDFC chief Deepak Parekh on Monday said the proposed merger of Housing Development and Finance Corporation (HDFC) with HDFC Bank was like finding a new home for the Corporation that is significantly more promising. The Board of HDFC has approved the amalgamation of HDFC Investments, HDFC Holdings and HDFC into HDFC Bank, a move that will enable the largest private sector lender to build its housing loan portfolio and enhance its existing customer base. Addressing media persons after announcing the merger, Parkeh said, “…after 45 glorious years of providing home loans to over 9 million customers, the time is right for HDFC to find a new home. Our new home is with our family, with our own people, but it’s bigger, better and significantly more promising.” The veteran banker noted that in the past, the merger would not have been as value accretive as at present, and that the proposed merger of HDFC with HDFC Bank will lead to significant synergies for the combined entity and to better returns for all stakeholders. “The combined strength of the balance sheet of the combined entity, the ability to be competitive on the funding side and the ability to offer the entire range of mortgage products makes it a win-win for both institutions,” he added. According to Parekh, the merger will ensure lower cost of funds will be made available for the mortgage business and that the Bank will have access to the time tested mortgage origination and loan servicing processes of HDFC. The amalgamation, which is subject to the approval of the shareholders of HDFC and HDFC Bank respectively, RBI, stock exchanges, SEBI and such other regulatory and statutory approvals, is expected to be completed in the second or third quarter of FY2024. “The merger makes the combined entity strong enough to not only counter competition but make the mortgage offering even more competitive. We will be able to offer all the variations in the mortgage product which currently we are unable to offer as a HFC like the OD product,” Parekh said. He noted that the funding challenges both in quantum and cost will be minimized by the combined entity. Terming the proposed amalgamation as merger of “equals”, Parekh said it (merger) will capitalize on HDFC’s domain knowledge in real estate and mortgages and operational efficiencies in processing mortgages, whilst leveraging on the cost of funds efficiencies and the distribution network of the bank. Listing out the benefits of the merger, Parekh said the merger will benefit the economy as a larger balance sheet and capital base will allow greater flow of credit into the economy. “It will enable underwriting of larger ticket loans including infrastructure, which is an urgent need of the country. It will also enable the delivery of the home loan offering to a large base of over 68 million customers of HDFC Bank in a seamless manner and inter alia improve the pace of credit growth in the economy,” he said. Since HDFC is a significant provider of home loans to low income group and middle income group segments under the affordable housing initiatives under the Pradhan Mantri Awas Yojana, access to housing finance for this category would improve further on account of the low cost funds available with HDFC Bank. “A larger balance sheet will also facilitate flow of a larger quantum of credit into the priority sector, including agriculture,” Parekh added. As of April 1 the market capitalisation of HDFC Bank is Rs 8.36 lakh crore or USD 110 billion and HDFC Rs 4.46 lakh crore or USD 59 billion. Its asset size as on September 30, 2021 was Rs 18.44 lakh crore or USD 243 billion and HDFC (consolidated) at Rs 8.80 lakh crore or USD 116 billion. The Bank has requested RBI for a phased-in approach in respect of SLR/CRR, priority sector lending, grandfathering of certain assets and liabilities and in respect of some subsidiaries. “These requests are under consideration by RBI in terms of their letter dated April 1,” he added. According to Parekh, HDFC will continue to operate as an independent entity on an ‘as is’ basis until the effective date “It is envisaged that post the effective date all HDFC branches/offices in India will be retained and mortgages will continue to be offered from these outlets. Over a period of time these branches will be converted to full service banking branches,” the banker added. PSK SHK1819