HDFC all set to merge with HDFC Bank

HDFC an HDFC Bank merger

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26 Aug, 2025 12:21

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Mortgage lender Housing Development Finance Corporation (HDFC) on April 4 said its board has approved the merger of its wholly-owned subsidiaries HDFC Investments Limited and HDFC Holdings Limited with HDFC Bank Limited.

HDFC will acquire 41 percent stake in HDFC Bank through the transformational merger, according to an HDFC Bank filing with the stock exchanges.

A merger of equals, says Deepak Parekh, Chairman, HDFC Limited

"This is a merger of equals. We believe that the housing finance business is poised to grow in leaps and bounds due to the implementation of RERA, infrastructure status to the housing sector, government initiatives like affordable housing for all, amongst others," Deepak Parekh, Chairman HDFC Limited, said.

As HDFC veterans hail the merger, Parekh underlined how it would help the lender. "The resulting larger balance sheet would allow underwriting of large-ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector, including credit to the agriculture sector,” he said.

'Merger will enhance diversity of assets of combined entity'

The HDFC-HDFC Bank merger will mitigate single product risk, and enhance the diversity of assets of the combined entity. The combined entity will be in a position to offer mortgage products seamlessly vs the current assignment route, said Deepak Parekh in press conference today.

'Regulatory changes over past 3 years reduced barriers for merger'

Regulatory changes over the past three years have reduced barriers for merger, said Deepak Parekh. The merger makes the mortgage offering of the combined entity even more competitive, he added.

Elaborating further Deepak Parekh said, "Merger will mitigate single product risk, enhance diversity of assets of combined entity. Combined entity will be in a position to offer mortgage products seamlessly vs current assignment route. HDFC will continue on an as-is basis until the merger. Post effective date of merger, all HDFC branches and offices will continue to offer a mortgage."

'Post-closing of deal, HDFC Bank will be 100% owned by public shareholders'

"Only after obtaining all regulatory approvals will the merger become effective. Post-closing, HDFC Bank will be 100% owned by public shareholders. Shareholders of HDFC Ltd will own 41% stake in HDFC Bank post-merger. Customers of HDFC and HDFC Bank will be the biggest beneficiaries," Deepak Parekh also said.

'Merger process to take about 12-18 months'

This process will take 12-18 months because of numerous approval, said Deepakh Parekh in the press conference. The RBI doesn’t allow over 75-year-old officials to be on the Board, I have crossed that age, added Parekh. Keki will have a year or year-and-a-half so he has time and he can be a director on Board, whatever Shashi wants him to do. Keki Mistry does not wish to be a full time executive but can be on the Board, said Parekh.

'After 45 years, we have found home in our own company'

HDFC Chairman said that after providing nine million homes, they require a home and that they have found a home in their own family company.

See potential for 7% more room for international investors, post merger: Keki Mistry

Parekh was echoed in same breath by HDFC Vice-Chairman and CEO Keki Mistry. "This merger will make HDFC Bank a large lender even by global standards. It will make more room for FII holding in HDFC Bank."

See potential for seven percent more room for international investors, post the transaction, said HDFC CEO, Keki Mistry. There can be 7-8 percent increase in foreign holding in combined entity post-merger, he added.

Mistry further said that upon regulatory approval, the merger will be effective, at the approved ratio. The HDFC-HDFC Bank merger will make HDFC Bank a large lender even by global standards.

"HDFC is now required to maintain the liquidity ratio. Regulatory changes have reduced the barriers for merger over the years. HDFC Bank will be 100 percent owned by shareholders. NBFCs now needed to move towards core banking solutions platform, like banks. HDFC and HDFC Bank to continue to operate independently, till the merger date. Cross-selling of banking products will be possible to HDFC Customers. All associates and subsidiary of HDFC Ltd will subsequently be owned by HDFC Bank. Post-merger, HDFC Bank will become one of the largest banks in the world," Mistry said.

He informed that there could be a 7-8 percent increase in foreign holding in the combined entity after the merger.

The HDFC-HDFC Bank merger is expected to be completed by the second or third quarter of of FY24. HDFC said the Proposed Transaction shall enable HDFC Bank to build its housing loan portfolio and enhance its existing customer base.

Cost of borrowing for HDFC will come down: Former SBI Chairman Rajnish Kumar

The advantage of the merger was that the cost of borrowing for HDFC Ltd will come down, former SBI chairman Rajnish Kumar has said in a CNBC TV18 interview. "When the cost comes down the combined entity gains in terms of cost efficiencies and it is value accretive for both the shareholders of HDFC and HDFC Bank,” he said.

Didn't see value on combined basis 6-7 years ago: HDFC MD & CEO Sasidharan Jagdishan

Acknowledge that 6-7 years ago we did not see the value on a combined basis. The fastest-growing engine for bank is micro-segment which qualifies for the priority sector, said HDFC MD & CEO, Sashidhar Jagdishan. The interest rate regime has come down and there is no more a drag on reserve requirements, he added.

HDFC an HDFC Bank merger has been in news for a while. In fact, back in 2015, HDFC Chairman Deepak Parekh had said his firm could consider a merger with HDFC Bank provided circumstances are in favour. But, the wait for the merger got longer with the parent putting the idea in backburner. Parekh had said that the merger makes sense provided there is no loss of value for shareholders.

With the parent finally merging the bank, the resultant entity will emerge as a powerhouse in the Indian banking industry.

This merger follows a proposal by RBI for large NBFCs to convert into banks, after the lending space was shaken up by the IL&FS crisis in 2018. HDFC is India’s largest mortgage lender and HDFC Bank is the top private bank.