Deepak Parekh, chairman, HDFC, in an interview with Anurag Shah of Zee Business talks about the merger of Gruh Finance with Bandhan Bank and positives and challenges that exist in the economy. 

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What are the synergies between Gruh Finance and Bandhan Bank? 

There is a great synergy between Bandhan Bank and Gruh Finance, a company that raises funds from the market and has its presence in west India. Gruh is into housing loans and offers loans for affordable housing, rural and semi-urban housing. It is not a bank like Bandhan that has deposits, current and savings account and has raised Rs 33,000 crore through deposits. Bandhan has its presence majorly in eastern India and its merger with Gruh will enable it to enter a new area of housing, bring the expertise of staff and a roadmap and access to western India. But the merger will give birth to conflict of interest, as both of us are present in western India as a non-banking companies. In addition, we are engaged in offering small loans like a credit link scheme that offers a subsidy of Rs 2-2.50 lakh to first-time homeowners. Interestingly, we have won first prize in a row for doing the largest number of affordable homes under the CLSS scheme. Gruh also wants to do the same and here comes the conflict of interest between the two. 

How much stake will HDFC have in Bandhan? And are you confident about getting the approvals?

The merger will need approval from shareholders, Competition Panel and Reserve Bank of India. We will wait and watch. Bandhan is a financial investment like RBL Bank, where we had 4.5% shares, and they have been sold. Now, we will request RBI and wait for its permission. 

Let us know about the comfort and challenges prevalent in our economy at present?

The economy is comfortable, and it can be gauged by looking at the food prices and inflation, which are all-time low at present. For instance, have a look at onion prices and compare it with prices of the past. There is a growth in capital investment in the cement sector, steel sector, which is quite buoyant and expanding and construction, where road and airport construction are at peak. Thus, all these are the positive signs of the country. So, I am very confident and optimistic about the future of the country. 

Tell something about the challenges?

Challenges are related to the speed of implementation of projects such as construction permits delayed due to certain constraints. Quick approvals, which needs a single window clearance, will help in starting the work, leading to employment. 

It means consolidation within companies is good for the industry and the companies.  

It’s time for consolidation and it is happening across different industries including financial services, for instance, IDFC and Capital First. We tried to have Max Life, but were not able to get insurance and regulatory permissions. We have bought L&T Insurance and I feel more consolidation can be seen in the financial sector in time to come. 

It means the consolidation process is here to stay?

Yes, the consolidation process will remain active and we are also looking for opportunities. 

Are you eyeing something in general insurance?

Yes, but value creation should be there.