The merger of the country’s largest housing finance company, HDFC Ltd, with its largest private bank, HDFC Bank, announced on Monday, will create a financial services conglomerate. “The resulting larger balance sheet would allow underwriting of large ticket infrastructure loans, accelerate the pace of credit growth in the economy, boost affordable housing and increase the quantum of credit to the priority sector…,” HDFC Ltd Chairman Deepak Parekh said on the occasion.
But how will customers of both entities benefit post the amalgamation? First, the amalgamation process is likely to be completed by 12-18 months after requisite regulatory approvals; till then HDFC Ltd and HDFC Bank will continue to operate as separate entities.
Gains both ways
But later, the mortgage business will gain from the low-cost funds of the bank and the bank will gain from HDFC’s competence in mortgage lending, says experts. Senior management officials of HDFC Ltd and HDFC Bank have also pointed out that there are cross-selling opportunities for both entities. HDFC customers will have choices to compare before applying for a personal loan or a credit card from HDFC Bank. Similarly, existing HDFC Bank customers will prefer applying for a home loan from the amalgamated mortgage business entity, says a moneycontrol.com report.
Also read: Home loans organisation HDFC to merge with HDFC Bank
HDFC Ltd customers will have a full suite of products to choose from HDFC Bank after amalgamation. As per data shared by the top managements of HDFC Ltd and HDFC Bank at a press conference on Monday, around 70 per cent of HDFC Ltd’s customers do not bank with HDFC Bank, indicating a significant cross-selling opportunity. Also, close to 80 per cent of HDFC Bank customers do not have mortgages, indicating low penetration. This will go away after amalgamation, adds the report.
Customers can also expect more competitive housing products from HDFC Bank after the amalgamation. HDFC Ltd is a significant provider of home loans to the Low-Income Group (LIG) and Middle-Income Group (MIG) segments under the affordable housing initiatives of the Government of India. Access to housing finance for this category would be improved further because of low-cost funds available by HDFC Bank, reports India Today.
Large presence
HDFC Bank has a presence in more than 3,000 cities or towns through its 6,342 branches, with about 50 per cent of these branches in semi-urban or rural areas in the country. Leveraging this distribution might, the proposed transaction would broad base the home loan offering, synonymous with the national objective of Pradhan Mantri Awas Yojana that intends to provide housing for all, the report added.
As for deposit rates of account holders, experts do not foresee any great change. For the current customers, the deposit rates and the other terms and conditions around the term deposit will continue to hold till maturity. However, after amalgamation, the deposit rates of HDFC Bank will apply while renewing on maturity or investing a fresh amount in a term deposit.