Deepak Parekh - Chairman of HDFC Ltd expresses his views on the mega-merger

RBI is examining this biggest merger in Indian corporate history

The big news that stirred markets in the previous week was the merger between HDFC and HDFC Bank. The news sent the stock soaring over 11 and 9 per cent, respectively. It is said to be the biggest merger in Indian corporate history, and the entity now commands the highest weight in Nifty. HDFC chairman Deepak Parekh expressed his thoughts on this tremendous corporate action. 

He feels that one of the many strategic rationale for the merger is the reduction in the gap in liquidity requirements between a bank and an NBFC. “Change is inevitable but change is welcomed when it is beneficial to all the stakeholders. The merger makes the combined entity strong enough not only to counter competition but make the mortgage offering even more competitive”, he said. 

HDFC now will be able to offer various mortgage products which otherwise it would not have such as an overdraft. He feels that the cost of funding will also be minimized and hence the combined entity will capitalize on its domain knowledge in real estate and mortgages by leveraging operational efficiencies and a wide network. 

RBI has been examining this huge merger and it has objected that a bank cannot own an insurance company as its subsidiary. Deepak Parekh said that many private and public sector banks have insurance companies, AMCs, and others as their subsidiaries, which is why logically there should not be a problem. However, he said it is possible to demerge the insurance segment if asked by RBI.