Second innings for the banking behemoth

The much-anticipated merger has brought a win-win situation for the bank and the NBFC

Finally, HDFC – India’s largest housing finance bank – and HDFC Bank – India’s largest private bank – joined hands. Their merger was announced over a year ago to strengthen HDFC Bank’s position in the country.

Reasons behind the merger

Although the Indian housing finance market has grown significantly over the years, HDFC Bank’s share in the pie was low. Generally, average deposits maintained by home loan borrowers are five to seven times more than those of retail account borrowers. Hence, home loan borrowers give stability to a bank’s balance sheet. Besides, these loans are considered secured loans where the property acts as a mortgage, while personal and credit card loans are considered unsecured loans.

The merger between HDFC and HDFC Bank has paved the way for the latter to increase the percentage of the secured loans in its total portfolio. Given that 70 per cent of HDFC’s customers do not bank with HDFC Bank, this would give a huge boost to the overall business.