HDFC merger has the blessings of PMO, RBI: Sashidhar Jagdishan

“A merger of this scale before we announced it had the blessings of the regulator, the Ministry of Finance and even the Prime Minister’s Office,” Jagdishan said. “It was an in-principle approval, it is not that they would give it to you in writing.”

Jagdishan said the banking regulator had asked it to keep the structure of the merged entity simple, with HDFC Bank being the holding company.

“The structure that we have applied for is the structure that has been asked by the regulator,” he said.

“Till the tax neutrality is not resolved, the regulator is very clear, keep it simple. It’s an A plus B merger where HDFC Bank will be the holding company. Like you have in a large PSU bank and two other private sector banks, where they have allowed banks to have some subsidiaries, we have asked for a similar structure.”

Jagdishan also said no investors have expressed dissent to the merger proposal so far.

“We have covered two geographies out of the 10 geographies; when you explain the rationale of the merger, it has been positive thus far,” he said.

On April 4, mortgage lender HDFC proposed to merge with HDFC Bank to create a financial services behemoth, as a series of regulatory tightening measures had over the years nullified HDFC’s advantages of remaining a Non-Banking Financial Company (NBFC).

The regulator has also eased the statutory liquidity ratio (SLR) and the cash reserve ratio (CRR) requirements over the last few years, lowering it to a combined 22% from 27% earlier, making the capital requirements easier.