RBI approves HDFC Bank to merge with its parent company

The Reserve Bank of India (RBI) has authorised the proposed merger between HDFC Bank and its parent company, mortgage lender Housing Development Finance Corp., according to the largest private lender in India on Monday (HDFC).

“Please note that HDFC Bank has received a letter dated 4 July 2022 from the Reserve Bank of India (RBI) whereby the RBI has accorded its no objection for the scheme, subject to certain conditions as mentioned therein,” it said in a regulatory filing.

The merger, according to HDFC Bank, is pending a number of statutory and regulatory clearances, including those from the respective shareholders and creditors of the companies involved as well as the Competition Commission of India, the National Company Law Tribunal, and other competent authorities.

In order to increase the combined company’s competitiveness and provide access to a captive customer base for product cross-selling, HDFC Bank and HDFC announced their agreement in April. Subject to regulatory and other approvals, the merger, which is anticipated to completion in 18 months, will dramatically increase its advantage over rival private sector banks ICICI Bank and Axis Bank in terms of total loans.

Together with HDFC, HDFC Bank is currently in the home loan sector. According to the agreement, HDFC Bank sells mortgages, and HDFC approves and disburses. For the transactions, HDFC Bank receives a sourcing fee and has the option to acquire up to 70% of the fully disbursed loans. The combined company’s loan book amounted at ₹17.9 trillion as of December 31, far exceeding that of ICICI Bank ₹8.14 trillion and Axis Bank ₹6.65 trillion.