homefinance NewsHDFC Bank will have to compete in the market for deposits, says former RBI deputy governor SS Mundra
HDFC Bank will have to compete in the market for deposits, says former RBI deputy governor SS Mundra
HDFC Bank has been aggressively raising deposits. This aggression has had an impact on the cost of funds of other banks. Experts discuss how this merger impacts the overall banking and NBFC sectors.
The mega banking merger is finally complete, and July 13 is set as the record date for the merger. Hence, from July 14 HDFC shares shall stop trading. All HDFC Ltd shareholders shall get 42 shares of HDFC Bank, for every 25 shares held in HDFC Ltd.
The first merged HDFC numbers are also out. Advances have grown from Rs 16 lakh crore in March (pre-merger) to Rs 22.5 lakh crore post-merger. To support this, HDFC Bank has been aggressively raising deposits over the last few months. This aggression has had an impact on the cost of funds of other banks.
Every single bank from IndusInd Bank, Federal Bank, RBL Bank, Karur Vysya Bank, and Bandhan Bank has reported at least a 2-percentage point drop in their CASA (current account and savings account) or low-cost deposits. Only one bank has revealed its cost of deposits. AU Small Finance reported that the cost of finance went up by 30 basis points to 6.58 percent in the first quarter. In the same quarter, bond yields fell by 40-50 basis points.
In an interview with CNBC-TV18, former RBI deputy governor SS Mundra emphasised the significance of competition for HDFC Bank, underscoring the need for the bank to effectively position itself to attract and retain deposits amidst a dynamic market environment.
“In the case of HDFC, on both liability and asset side, they would need to do a lot of course correction and some of the things to comply with the regulation. And obviously, they will have to compete in the market for the deposits,” Mundra said.
Suresh Ganapathy, Banking Analyst at Macquarie Capital Securities, said, “There is going to be enormous pressure on resources, and you are not looking at it for the next 3-6 months perspective because the combined entity needs to grow at 18-20 percent for the next four years. The extent of deposit mobilisation also needs to be to that extent, 18-20 percent.”
Also Read | HDFC Bank chairman foresees cross-selling opportunities and profitable housing growth post-merger
Lakshmi Iyer, CEO-Investment Advisory at Kotak Investment Advisors, said, “Within the NBFC space, mutual funds were the large holders for example. There we have seen some spread compression and the absolute deal levels have come down. So yes, the psychological impact will be there, but the bigger impact has been on the HFCs.”
For the entire discussion, watch the accompanying video
First Published: Jul 5, 2023 3:50 PM IST
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