HDFC and HDFC Bank Merger: Creating India's Second-Largest Financial Institution

Discover the details of the HDFC and HDFC Bank merger, including its effects on deposits, loans, shares, and mutual funds, forming a significant financial institution in India.

 HDFC and HDFC Bank Merges
  1. The USD 40 billion merger is set to create India's second-largest financial institution.
  2. Depositors may choose to withdraw funds or renew deposits post-merger.
  3. HDFC Bank customers gain access to HDFC Ltd's home loan solutions.
  4. Shareholders to receive HDFC Bank shares based on the swap ratio agreed upon.

In April 2022, HDFC Bank announced the merger between its parent company, HDFC (Housing Development Finance Corporation), and the HDFC Bank. The USD 40 billion merger is expected to conclude in July, 2023. Deepak Parekh, the Chairman of HDFC, stated that the merger would become effective on July 1, 2023. However, the corporation later clarified that these dates were tentative and subject to further approvals beyond their control. itself.

Upon merging, the combined entity, to be known as HDFC Bank, will become India's second-largest financial institution in terms of assets, trailing only the State Bank of India (SBI).

Also ReadHDFC-HDFC Bank merger: How does it affect consumers?

What will happen to HDFC FD account holders?

For individuals holding fixed deposits (FDs) with HDFC Ltd, it is essential to determine if their investments are set for auto-renewal. After the merger, the new entity may offer depositors the choice to either withdraw their funds or renew their deposits. HDFC Ltd currently provides interest rates ranging from 6.56% to 7.21% for terms ranging from 12 to 120 months, effective from June 21. On the other hand, HDFC Bank offers interest rates of 3% to 7.25% on FDs maturing within 7 days to 10 years, effective from May 29.

After the merger, depositors who choose to renew their deposits will benefit from enhanced safety, under the Deposits Insurance and Credit Guarantee Corporation (DICGC) for a maximum coverage of up to Rs. 5 lakh.

How will HDFC home loan borrowers be affected?

In terms of home loan borrowers, HDFC Bank customers will gain access to the home loan products provided by HDFC Ltd. Existing home loan borrowers will not face any challenges as their loans will be transferred to the merged entity and continue as before. The interest rates on home loans may undergo revision due to the requirement for all banks to link interest rates on floating-rate retail loans to an external benchmark since October 2019. Currently, HDFC offers home loan interest rates starting from 8.50% per annum, as stated on the HDFC Ltd website.

Hows does it affect the shareholders?

Regarding shareholders, they will receive shares of HDFC Bank in the swap ratio agreed upon in the merger. However, mutual fund investors may face some limitations, as at least 60 equity mutual fund schemes are expected to exceed the 10% cap on combined exposure to HDFC Bank and HDFC, as per the regulations set by the Securities and Exchange Board of India (SEBI). It is important to note that certain exemptions apply to exchange-traded funds and funds investing in specific sectors.

Also Read: HDFC-HDFC Bank Merger effects on shareholders

How will retail customers benefit?

Regarding the impact on deposit holders of HDFC Ltd, they may be given the option by the bank to either withdraw their funds or renew their deposits at the prevailing interest rates at the time of renewal. Customers are likely to benefit from the merger as they will gain access to a wider range of products offered by HDFC Bank, such as credit cards, CMS solutions, personal loans, car loans, and business loans.












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