HDFC Bank expects healthy growth across segments in next 5-6 years: Chairman Atanu Chakraborty

The merger of HDFC, India's oldest and largest mortgage lending firm, with HDFC Bank came into effect on July 1

The country’s largest private sector bank, Housing Development Finance Corporation (HDFC) Bank will see healthy growth across segments in the next 5to 6 years, said Chairman Atanu Chakraborty.

The bank, Chakraborty said in an exclusive interview with CNBC-TV18 after its merger with HDFC Ltd., will bring in healthy net interest margins (NIM) and offer customers of HDFC Ltd. products like insurances, personal loans etc. at competitive rates through its large network.

“The bank will grow steadily across housing, micro small and medium enterprises (MSME), corporate and retail and priority sector lending segments. We will be able to provide funds at a cheaper rate to customers,” said Chakraborty.

On priority sector lending, the Reserve Bank of India (RBI) allowed the bank to meet priority sector lending requirements after the merger with HDFC in a gradual manner, up to three years.

“There is a standard stipulation for every bank and these were not there for HDFC Ltd. We will be able to meet the target on the basis of the roadmap provided by the RBI,” Chakraborty said.

The total branch network of HDFC Bank till March 31, 2023 was 8,344. Whereas, HDFC Ltd, has 478 interconnected offices which will now be converted into HDFC Bank branches.

Chakraborty highlighted that now with a wider network, the combined entity through its large network will bring in healthy NIMs.

“Alongside healthy NIMs, we also see branch expansion happening by both physical and digital means. We aim to make customers’ journey simpler through digital service,” said Chakraborty.

Previously, Sashidar Jagdishan, Managing Director and Chief Executive Officer (MD and CEO), HDFC Bank in a letter to the 4000 employees of HDFC Ltd who joined the bank said that the bank’s future is bright.

“The pace at which we aim to grow - we could be creating a new HDFC Bank every 4 years," said Jagdishan.

India’s retail inflation fell to a 25-month low of 4.25 percent in May 2023.

On this, Chakraborty said: “There is a need to be mindful of lack of growth and sticky core inflation globally.”

He also highlighted that currently, the mortgage market only forms 11 percent of India’s gross domestic product (GDP) whereas that of China and other south-asian countries is higher.

“India is a very underpenetrated market. But we see the demand only going up as the overall growth of the country is going up.

We only see opportunity in the market for everyone and no competition. We also see that the bank will be able to provide competitive rates for home buyers,” said Chakraborty.

The merger of HDFC, India's oldest and largest mortgage lending firm, with HDFC Bank came into effect on July 1. Keki Mistry and Renu Karnad from HDFC Ltd will be joining HDFC Bank board, Chakraborty said.

HDFC and HDFC Bank announced the decision to merge on April 4, 2022. As per the plan, HDFC will acquire a 41 percent stake in HDFC Bank through the merger.

In fact, Deepak Parekh, Chairman, HDFC Ltd, had said, back in 2015 itself, that his firm could consider a merger with HDFC Bank, if circumstances were favourable. But the wait for the merger got longer with the parent putting the idea on the backburner. Parekh had said that the merger makes sense, provided there is no loss for shareholders.

Once the deal comes into force, HDFC Bank will be 100 percent owned by public shareholders, and existing shareholders of HDFC will own 41 percent of the bank. With the parent finally joining with the bank, the combined entity will emerge as a powerhouse in the Indian banking industry.