The HDFC Group was founded in 1977 as a specialized mortgage company to address the housing shortage in India. Lending to individuals still marks the key operating area of the company. The HDFC Group has since then developed into a financial conglomerate with diversified businesses such as banking, insurance, asset management, and education loans. The group is best known for its banking subsidiary, the HDFC Bank, which was founded in 1994 during market liberalization.
HDFC’s diversified businesses
In 2022, ranking second as India’s most valuable brand, HDFC Bank had a brand value worth over 32 billion. It was the 11th largest bank worldwide in terms of market capitalization. HDFC Limited was the leading housing finance company in India that year. In the field of insurance, HDFC is involved in two major joint ventures: HDFC ERGO General Insurance Company with German ERGO Group as well as HDFC Standard Life Insurance Company with UK-based Standard Life. The latter was one of the biggest private life insurance providers in the Indian market, which was dominated by the public sector player, Life Insurance Corporation (LIC). Apart from the key business of banking and insurance, subsidiaries of the HDFC Group were active in a wide range of areas within the financial services sector. The brokerage company HDFC Securities recorded over a million active clients and the asset management wing of the group, HDFC Mutual Funds, ranked the third largest in terms of AUM. HDFC Credila, founded in 2006, was India’s first lending company focusing on education loans.
Merger between HDFC Bank and HDFC Limited
Over the last few years, the RBI has been bringing the regulatory framework of banks and NBFCs into closer alignment. Guidelines aimed at narrowing the arbitrage for NBFCs played a decisive role in the amalgamation of the mortgage financier, Housing Development Corporation, into its banking arm HDFC Bank. It has been termed one of the biggest mergers in the history of India’s corporate finance. The subsidiaries (HDFC Holdings and HDFC Investments) of HDFC Ltd will also shift to HDFC Bank.
The proposed merger will enable HDFC Bank to further build its housing portfolio and the mortgage lender HDFC Ltd gets access to HDFC Bank’s deposits, which are low-cost funds. The merged entity will also be able to expand in the rural and semi-urban markets, where HDFC Bank already has a huge network. It will further provide cross-selling opportunities to HDFC Ltd customers. The merger is expected to make the new entity one of the largest banks in the world. The merger has received approval from regulators and is expected to be completed during the financial year 2024.
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