HDFC’s Parekh expects regulatory response to merger to be fair, judicious

Deepak Parekh, chairman of HDFC Ltd, the largest mortgage financier of the country said he expects the regulator’s view on the proposed merger with HDFC Bank to be fair and judicious while asking the stakeholders to be patient.

In his address to the shareholders in the annual report, the HDFC patriarch said after 45 glorious years of providing homes to millions of customers, the time is right for HDFC to find a new home.

In April, the HDFC and HDFC Bank announced a plan for an all-stock deal merger, for which all the regulatory approvals are expected in 15-18 months.

HDFC Bank has requested the Reserve Bank of India for more time to meet several regulatory requirements like cash reserve ratio, statutory liquidity ratio and priority sector lending targets.

“At this juncture, we are awaiting regulatory guidance on the path forward. We remain respectful of all our regulators and are confident that the outcome will be judicious and fair at a systemic level,” Parekh said in the note to the shareholders of HDFC.

“My only ask of our stakeholders is for your patience as we navigate through the complexities of this transaction. More than ever before, we need your trust and support,” he said.

Parekh said that the optimum path to scale up housing finance is to be housed within a banking structure.

The pool of resources for lending will be significantly larger and at lower costs.

“From a regulatory perspective, it is prudent for all large providers of housing finance to operate on a level playing field, with the same rules. Globally too, the scale of mortgage assets is exponentially larger in banks compared to non-banking financial entities,” he said.

Commenting on the Indian housing finance market, he said, the country should be able to double its home loans to around $ 600 billion in the next five years.

“This would coincide with the period when India attains its much-aspired goal of being a US$ 5 trillion economy. Despite the doubling of housing loans, India’s mortgage penetration would still remain low at an estimated 13% of GDP,” he said.

Parekh said in order to take India’s mortgage to GDP ratio to cross 20%, housing loans in India will have to grow exponentially for decades to come.

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