- June 28, 2023
HDFC-HDFC Bank merger on July 1 – Times of India
MUMBAI: The merger of housing finance major HDFC with its banking subsidiary HDFC Bank will be effective July 1, HDFC chairman Deepak Parekh said Tuesday. The boards of HDFC and HDFC Bank will meet on June 30 to complete the merger, he said.
HDFC to bank on culture of trust to preserve legacy
“Buying a house is a family’s biggest investment in terms of acquisition cost. They run from pillar to post to meet the balance requirement and have so many questions,” HDFC chairman Deepak Parekh has said. The culture that HDFC has fostered is one where employees listen to the concerns of every family and try to answer questions like whether they can trust the builder or are paying the right price for their home. Parekh hopes that HDFC Bank will follow the same culture.
One of the conditions HDFC has set with HDFC Bank for the merger is that the bank will absorb all its employees, and the erstwhile HDFC staff will continue to be involved in housing finance. While this protects the employees, who have been doing only one line of activity, it also aims to introduce the HDFC culture of personalised service in the bank.
But retaining the culture would be a challenge as the erstwhile HDFC staff will number over 4,000 as against over 1,70,000 for the bank. “Now in a bank that does not do housing, the culture must be different as they do auto, personal and unsecured loans,” said Parekh.
According to Keki Mistry, VC & CEO of HDFC , after the merger there will be some changes in working style. “The sanctioning authority would change as the RBI does not allow marketing people to sanction a loan. We were a smaller organisation and could do that. They have to work in silos. Marketing gets the loan and can have no say in sanctioning, and the appraisal and sanctioning teams have to be different,” said Mistry.
An indication of HDFC’s conservatism is that the organisation did not get too innovative with home loan products by offering ‘teaser loans’ like some of its rivals during the global financial crisis. The total number of individual customer loans that had to be written off are just 0.04% since the corporation began operations. According to Mistry, the conservative culture is also there in HDFC Bank, which is reflected in its low level of non-performing assets.
Days before the merger, HDFC launched the HT Parekh Legacy Centre to preserve the memory of its founder. Deepak Parekh’s uncle H T Parekh founded HDFC in 1977 when he was 67 after his retirement as ICICI chairman.
The formation of HDFC was a culmination of a lifelong dream for H T Parekh, who wanted to replicate the housing finance model in India after seeing how building societies made a difference in the UK during his student days in London. At that time, home loans were a no-go area for financial institutions, and most Indians could afford to buy homes only close to their retirement.
Founder was against floating bank in ’90s
Opening the legacy centre ahead of the merger was crucial because, unlike HDFC, which owes its existence to H T Parekh, the bank was formed despite the senior Parekh’s scepticism over getting into the banking business. He felt that banks were very large institutions and too unwieldy for HDFC which was a small group of people.
HDFC to bank on culture of trust to preserve legacy
“Buying a house is a family’s biggest investment in terms of acquisition cost. They run from pillar to post to meet the balance requirement and have so many questions,” HDFC chairman Deepak Parekh has said. The culture that HDFC has fostered is one where employees listen to the concerns of every family and try to answer questions like whether they can trust the builder or are paying the right price for their home. Parekh hopes that HDFC Bank will follow the same culture.
One of the conditions HDFC has set with HDFC Bank for the merger is that the bank will absorb all its employees, and the erstwhile HDFC staff will continue to be involved in housing finance. While this protects the employees, who have been doing only one line of activity, it also aims to introduce the HDFC culture of personalised service in the bank.
But retaining the culture would be a challenge as the erstwhile HDFC staff will number over 4,000 as against over 1,70,000 for the bank. “Now in a bank that does not do housing, the culture must be different as they do auto, personal and unsecured loans,” said Parekh.
According to Keki Mistry, VC & CEO of HDFC , after the merger there will be some changes in working style. “The sanctioning authority would change as the RBI does not allow marketing people to sanction a loan. We were a smaller organisation and could do that. They have to work in silos. Marketing gets the loan and can have no say in sanctioning, and the appraisal and sanctioning teams have to be different,” said Mistry.
An indication of HDFC’s conservatism is that the organisation did not get too innovative with home loan products by offering ‘teaser loans’ like some of its rivals during the global financial crisis. The total number of individual customer loans that had to be written off are just 0.04% since the corporation began operations. According to Mistry, the conservative culture is also there in HDFC Bank, which is reflected in its low level of non-performing assets.
Days before the merger, HDFC launched the HT Parekh Legacy Centre to preserve the memory of its founder. Deepak Parekh’s uncle H T Parekh founded HDFC in 1977 when he was 67 after his retirement as ICICI chairman.
The formation of HDFC was a culmination of a lifelong dream for H T Parekh, who wanted to replicate the housing finance model in India after seeing how building societies made a difference in the UK during his student days in London. At that time, home loans were a no-go area for financial institutions, and most Indians could afford to buy homes only close to their retirement.
Founder was against floating bank in ’90s
Opening the legacy centre ahead of the merger was crucial because, unlike HDFC, which owes its existence to H T Parekh, the bank was formed despite the senior Parekh’s scepticism over getting into the banking business. He felt that banks were very large institutions and too unwieldy for HDFC which was a small group of people.
