What the HDFC-HDFC Bank merger means for customers

Customers can expect status quo till the merger takes effect, which could be Q3 or Q4 of FY24

In what is being called the mother of all mergers, India’s top housing finance company HDFC and HDFC Bank are set to amalgamate in an all-stock deal to create a company with a market cap of close to Rs 12.8 lakh crore.

The deal, which was successfully kept under wraps till its announcement on April 4, seems to be profitable for both companies and their stakeholders. But what will it mean for its depositors and customers?

The merger hasn’t happened yet

Customers of the two entities can rest easy for now as the status quo will be maintained till the merger takes effect. This could take another year or even more as the proposed merger has to be approved by many regulators including the Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI), Insurance Regulatory and Development Authority of India (IRDAI), Pension Funds Regulatory and Development Authority (PFRDA) and Competition Commission of India (CCI).

The amalgamation of the entities may be expected by Q3 or Q4 of FY24, the management has hinted. “HDFC and HDFC Bank depositors will continue to get the rates that they have been getting. After the merger, there will be a harmonisation at the bank’s card rates,” Sashidhar Jagdishan, MD and CEO, HDFC Bank, told Moneycontrol.

Also read: HDFC Limited to merge into HDFC Bank

HDFC’s distributors are confident of a smooth transition. Customers may be allotted branches in the new system based on their addresses, the report said. Depositors will get time to decide about their investments at that point.

Not to take the weight away from the merger which drove markets up significantly on Monday, but the approvals from a host of bodies could still hinder this deal. The IRDAI and RBI will be looking at the merger closely. Back in 2020, RBI had not allowed Axis Bank to own a major stake in an insurance firm, a precedent analysts believe could impact the HDFC deal as well.

What the merger means for customers

HDFC, a non-banking finance company (NBFC) will transfer all of its home loan portfolio to HDFC Bank after the merger, a banking entity. Both bodies, despite being under the purview of RBI, have different rules on the benchmarking of retail home loans.

The floating-rate retail loans provided by banks are linked to an external benchmark, which is the repo rate in case of most banks. NBFCs do not have to do the same with their retail loans, but they offer comparable rates to take on competition from lenders.