HDFC chairman Deepak Parekh on Monday said the optimum path to scale up housing finance is to be housed within a banking structure and asked stakeholders for patience with the merger.
In his message in the annual report 2021-22 of HDFC, Parekh said, "The pool of resources for lending will be significantly larger and at lower costs. From a regulatory perspective, it is prudent for all large providers of housing finance to operate on a level playing field, with the same rules."
He said globally too, that the scale of mortgage assets is exponentially larger in banks compared to non-banking financial entities.
The chairman said both HDFC and HDFC Bank are awaiting regulatory guidance on the path forward, "We remain respectful of all our regulators and are confident that the outcome will be judicious and fair at a systemic level."
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On April 4, India's most valuable lender HDFC Bank agreed to take over the country’s largest mortgage lender in a $40 billion deal, creating a financial services titan in the largest transaction in the nation’s corporate history.
Calling stakeholders for patience as both firms navigate through the complexities of this transaction, Parekh said, "More than ever before, we need your trust and support."
Further, he said, "Trust is the foundation for a successful merger. Fortunately, between HDFC and HDFC Bank, there is a natural affinity. Financial and human capital is critical through a merger process, as is a lucid communication strategy on key developments during this period."
Once the deal is effective, HDFC Bank will be 100 percent owned by public shareholders, and existing shareholders of HDFC will own 41 percent of the bank, according to stock exchange filings by the firms.
Parekh said, "It remains our every endeavour to be available and accessible to all our stakeholders to assuage concerns in an open and transparent manner."
"We have at length, already articulated the rationale for the proposed merger, which takes cognisance of the future growth potential of the country, the evolving macro environment, and changes in the regulatory architecture," he added.
Parekh said India is on the cusp of an economic transformation, "As the pivot of global growth shifts, India is envisaged to remain amongst the fastest-growing major economies. Much of India’s growth will continue to be powered by domestic consumption."
In the annual report, HDFC's chairman said India should be able to double its home loans to around $600 billion within the next five years. And this would coincide with the period when India attains its much-aspired goal of being a $5 trillion economy.
The HDFC-HDFC Bank merger is expected to be completed by the second or third quarter of FY24. As of date, HDFC has total assets of Rs 6.23 lakh crore, while HDFC Bank has assets worth Rs 19.38 lakh crore. HDFC Bank has a large customer base of 6.8 crore and a well-diversified low-cost funding base for growing the long-tenor loan book.
First Published: Jun 6, 2022 11:33 PM IST
