View: The HDFC twins' merger will leave India’s banks gasping
Three decades later, things are far more serious. Finance in the most-populous nation is moving into a higher gear. Of the two big changes expected this year, one has just occurred and created a juggernaut bigger than Morgan Stanley.
The other splash may see the birth of India’s own Ant Group Co., a digital-lending powerhouse being set up by the country’s wealthiest tycoon. These disruptions are taking place on the strength of a much larger consuming class that finance has helped create along the way. But is it big enough to sustain the industry’s latest makeover? The test will come in the deposits market.
Among the more serious aspirants for a banking license in 1993 — one that didn’t send in its application on a postcard — was Housing Development Finance Corp., then a 16-year-old specialist mortgage lender in a country where the culture of debt-financed homeownership was still in its infancy. After nearly three decades of spectacular growth, HDFC Bank Ltd. finally swallowed up its parent, HDFC, on July 1.
The combined entity, as HDFC investors’ stakes are swapped for shares in the bank over the next few days, will have a market value of $173 billion. What’s more, the juggernaut is showing no sign of slowing down. To sustain its 20% pace of annual asset expansion, the bank will need stable funding.
Suresh Ganapathy, head of financial services research in India at Macquarie Group Ltd.’s brokerage unit, estimates that the newly bulked-up HDFC Bank will go after as much as 20% of the banking system’s incremental deposits over the next three to four years. This could be highly destabilizing, at a time when the overall industry is gasping for liquidity. India’s extreme income inequality has an impact on banking.
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