The much-anticipated merger between HDFC Bank and HDFC is set to take effect from July 1, 2023, as announced by HDFC Group Chairman, Deepak Parikh. Both the top management teams of HDFC Bank and HDFC have expressed their confidence in this merger, highlighting its positive impact on the financial companies, their shareholders, customers, and the overall economy. However, one question remains: What will be the implications of this merger for HDFC's depositors and home loan customers?
Impact on fixed deposit (FD) customers:
For customers holding FDs with HDFC, the merger will bring a choice. HDFC Bank will offer these customers the option to either withdraw their funds by breaking the FD or renew their FD. Currently, HDFC provides interest rates ranging from 6.56% to 7.21% on FDs with durations of 12 to 120 months. On the other hand, HDFC Bank offers interest rates between 3% and 7.25% on FDs with durations ranging from 7 days to 10 years.
Insurance benefits for customers:
Following the merger, HDFC customers will enjoy the added benefit of insurance coverage on their deposits. The Deposit Insurance and Credit Guarantee Corporation provides insurance cover for deposits up to Rs 5 lakh for depositors.
Home loan benefits for HDFC bank customers:
As HDFC is primarily engaged in the home loan business, HDFC Bank customers will gain access to HDFC's home loan products after the merger. Additionally, HDFC Bank will take over the loans of HDFC's home loan customers. This transition may lead to changes in home loan interest rates for all HDFC Bank customers, as they will be linked to the repo rate-based rate framework.
Shareholder advantage:
Shareholders of HDFC will receive 42 shares of HDFC Bank for every 25 shares of HDFC, in accordance with the merger rules. The record date for this share exchange is expected to be on or around September 29, 2023.
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