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Following the news that HDFC’s wholly owned subsidiaries HDFC Investments Limited and HDFC Holdings Limited will be merged with HDFC Bank;
Parth Vala, Analyst at GlobalData, a leading data and analytics company, offers his views:
“The move will create a private sector banking behemoth in India. As of 30 September 2021, the combined total asset value of HDFC Bank and HDFC Ltd stood at about $376.5bn, almost double than that of India’s second largest private sector lender ICICI Bank with an asset base of $216.7bn, bringing it to the league of other global banks such as Santander UK Plc, Hana Financial Group, Handelsbanken, Itau Unibanco, and Bank of Shanghai. The merger will help HDFC Bank narrow the gap with the largest state lender, State Bank of India, whose total asset value amounted to $681bn.
“Touted as natural and logical, the merger will help both the entities to leverage each other’s strengths and grow on consolidated basis by cross selling banking and housing mortgage products. HDFC Bank will be able to strengthen its housing loan portfolio, whereas HDFC will have access to low-cost funds, distribution network and substantial customer base of HDFC Bank.
“The move is also seen by many as a step in the right direction in the context that India lacks banks with larger scale as compared to global counter parts. With government merging several state banks to create scale and achieve operational efficiency, strategic mergers such as this will help the Indian banking sector compete at global level.”