HDFC Bank CEO flags funding risk post merger, says net interest margins may get hit
PTI. Jagdishan flagged his concern to the shareholders at its maiden annual general meeting after the merger came into effect on 1 July. He said, "As you know, the risks of the merger are the funding part of it." The HDFC has not been fully successful in getting all the forbearance it had sought from the Reserve Bank of India (RBI) on the liabilities front as of now.
The apex bank regulating body had refused to provide any exemptions on Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements on the deposits that come from HDFC, which was a deposit-taking entity. ALSO READ: HDFC Bank hikes lending rates: Loan EMIs to go up. Check latest MCLR rates here Apart from this, concerning the RBI's move to put an incremental CRR of 10 percent on deposit accretions in all the scheduled commercial banks after May, RBI has raised questions.
However, the HDFC chief exuded confidence that the bank will be able to surmount the funding challenge and pointed the board, senior leadership, and staff are cognizant of the work at hand. As per Jagdishan, the merger, and the timing, made sense because of the advantages that it offers and added that the staff is "excited" to take on the funding challenge. "I think time will tell but we're extremely confident in the way that we have grown over the last 10 years, there is no reason why we will not be able to surmount the challenges and even grab the opportunity to grow similarly over the next many years," he said.
Also, HDFC had sought shareholders' approval to raise ₹50,000 crore from bond issuances going ahead. Jagdishan said the bank will be active on this front as part of its liabilities management. The latest merger with HDFC may impact the Net Interest Margins (NIMs) of the
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