HDFC Bank says no talks on merger, but possibilities need to be studied
Deputy managing director Paresh Sukthankar says impact on reserve requirements, funding needs to be examined
Mumbai: A senior HDFC Bank Ltd official on Monday agreed that the Reserve Bank of India’s (RBI) guidelines issued last week made the possibility of a merger with parent Housing Development Finance Corp. Ltd (HDFC) easier, adding, however, that the bank has to “review and study" the possibilities.
After announcing the bank’s results on Monday, deputy managing director Paresh Sukthankar told media persons in a conference call that the board did not discuss any such possibility at its meeting on Monday.
“Nothing is being discussed. There is a lot of conjecture and articles in the media after the new RBI guidelines... But the circular needs more analyses and none of that work has been done," Sukthankar said.
Speculation about a possible merger gained ground after RBI last week permitted banks to issue long-term bonds maturing in a minimum of seven years for affordable housing and infrastructure loans without maintaining the mandatory cash reserve ratio (CRR) and statutory liquidity ratio (SLR). Currently, banks must keep 4% of all deposits as CRR with RBI—which earn no interest—and invest 22.5% of their deposits in government securities.
This was a major stumbling block for HDFC’s merger with HDFC Bank because it was costly for the bank to take on HDFC’s loans and deposits and then provide reserves for them.
“What part of the notification applies, what impact it has on rates and how the market will shape up need to be studied. This circular is just out and whether it gives us some relief on HDFC’s liabilities and resources, and if so, in what proposition will require a fair amount of clarification for which no work has gone in yet," Sukthankar said.
“We have had no discussion in the board today on this. It is not a done deal and right now, just speculative. We have to figure out as to what impact it will have on our reserve requirements and what it will do to our funding."
HDFC shares were up 2.82% to ₹ 1,008.75 on Monday on BSE, while the benchmark index Sensex gained 0.28% to 25,713.62 points. HDFC Bank shares were down 0.43% to ₹ 828.90 and the banking index Bankex gained 0.31% to 17,666.04 points.
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