The Housing Development Finance Corporation (HDFC) board, India's leading housing finance company, approved the firm's and its subsidiaries' merger with HDFC Bank this week. Speaking to CNBC-TV18, Deepak Parekh, chairman of HDFC said that he hopes to hear from RBI about this shortly as the merger needs the approval of the central bank.
"If we are asked by RBI, it is possible to de-merge insurance cos after the merger. We have not asked for dispensation on CRR/SLR and other regulatory requirements. We have asked RBI to give us a stipulated period of time," he said.
Explaining the rationale of the deal, Parekh spoke about how the merger would help the shareholders.
"Banks today have a significant proportion of retail loans as mortgage loans
With our book coming into HDFC Bank, the tenor of mortgage loans goes up to 5.5-6 years which is a massive plus for the bank's shareholders," he reasoned.
Parekh sees the infrastructure sector as needing loans to grow fast a near-term occurrence.
"India needs large loans to be given. Expect new cement and steel plants, which would require huge money. If you have a larger and stronger balance sheet, you can lend more for large projects and infrastructure. A larger balance sheet means the bank can lend more for infrastructure," said the HDFC chairman.
Parekh reckons that there's ample liquidity in the system right now and there is recognition from RBI that large NBFCs should become banks. This favours the merger decision.
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"RBI's indirect direction is that large NBFCs become a bank was one of the reasons for the merger," he said.
Deepak Parekh confirmed that Keki Mistry will be joining the board of the new entity.
"Keki Mistry is 67. he will join the bank as a board member," he said.