India: The HDFC-HDFC Bank merger is one of the most significant mergers in Indian corporate history, announced on April 4, 2022, with the aim to garner bigger growth opportunities for the combined entity. The objective of this merger is to increase the number of bank branches offering housing loans. In HDFC Bank (the combined firm), there will be greater potential for expansion in the housing loan sector than in HDFC alone. The merger might lower the home loan interest rate. Since HDFC Bank will be able to borrow more money at reduced interest rates, the benefit might be passed on to the clients. It would be a management decision if the benefit will be exclusively given to new consumers or even to existing ones.

The USD40 billion merger is anticipated to be concluded by July. The merged business will be called HDFC Bank. After the merger, current HDFC stockholders would own 41% of the HDFC bank. On the other side, HDFC Bank will be 100 per cent owned by public shareholders. For every 25 shares of HDFC, shareholders will get 42 shares of HDFC Bank.

HDFC received the required approvals from the Reserve Bank of India (RBI), the Securities and Exchange Board of India (Sebi), shareholders of HDFC and HDFC Bank, the Pension Fund Regulatory Development Authority (PFRDA) and the Competition Commission of India (CCI) and National Company Law Tribunal (NCLT). The company has additionally obtained a no objection certificate (NOC) from the stock exchange.

The Reserve Bank of India approved specific regulatory relief for HDFC Bank Ltd. and Housing Development Finance Corporation in order to facilitate the merger of the two financial institutions. The bank stated in an exchange statement that the central bank had granted the bank permission to meet priority sector lending standards in a staggered manner over three years.

Commenting on the recent development, TechSci Research Director, Mr. Karan Chechi said, “Mergers and acquisitions of major market players in the BFSI sector are likely to expand lucrative opportunities. Also, organizations are anticipated to gain from such strategic tactics as it reduces competition, expands reach, increases market share, etc. Thus, such trends are projected to further boost the financial sector growth.”