Generally, NBFC’s have a high credit-to-deposit ratio because they don’t have SLR or CRR. So they lend a very large portion of their deposits, whereas when it comes to banks, it is not possible. So when a NBFC merges with a bank, the CD ratio generally increases for the bank. But in the case of HDFC Bank, it went above 100. So they have to slow down the gear of lending to 1 or 2 or shift the gear of deposit growth to 5 or 6. What is suspecious for me is: what is the reason for the hurry to merge HDFC with HDFC Bank soon after the pandemic? There were rumors that a large chunk of builder loan of HDFC is in verge of defaulting, so to tackle the situation, they have merged it with the HDFC Bank. I don’t know whether it is true or not. As a result of the merger, HDFC Bank shareholders who held the shares prior to the merger did not benefit significantly. The merger has actually had a bad impact on the shareholders, as the EPS has fallen now compared to pre-merger. I think the bad result of HDFC’s pandemic loan book is now affecting the shareholders of HDFC Bank as well.
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