HDFC Bank-HDFC merger: All you need to know about the impact on customers

India’s largest mortgage lender HDFC announced that its board had approved the merger of its wholly-owned subsidiaries HDFC Investments Limited and HDFC Holdings Limited with HDFC Bank.

According to equity analysts, the amalgamation of HDFC into HDFC Bank is likely to create the third-largest entity in India in market capitalization. The two entities’ managements expect the amalgamation process to be completed by the second or the third quarter of FY24, after requisite regulatory approvals. So far, the focus has primarily been on the management structure, business integration, benefits for both sides, etc. The operational details around interest rates and shifting accounts from HDFC to HDFC Bank are yet to be formally announced.

Here are some of the most common questions from customers of both entities.

How will customers of both entities benefit post the amalgamation?

HDFC Ltd and HDFC Bank will operate as separate entities until the merger takes effect, 12-18 months. The merged entity will gain from the merger’s synergies, say experts. “The mortgage business will gain from the low-cost funds of the bank, and the bank will gain from HDFC’s competence in mortgage lending,” says Shivaji Thapliyal, Lead Analyst, Institutional Equities, YES Securities.

Since HDFC Bank’s cost of funds is lower, part of this benefit could get passed on to home loan customers of HDFC Ltd with lower interest rates after amalgamation. “The new home loan customers, after amalgamation, could get a home loan at a similar or lower interest rate,” says Raj Khosla, founder of MyMoneyMantra. However, other experts Moneycontrol spoke to also pointed out that the final merger is nearly 12-18 months away. Hence, it is difficult to predict the benefits in terms of interest rates. Also, the extent of use to borrowers, if any, will depend on the interest rates in the system then. “It is premature to get into the nitty-gritties of interest rates,” says former banker and financial counselor VN Kulkarni.

This apart, as senior management officials of HDFC Ltd and HDFC Bank have pointed out, there are cross-selling opportunities for both entities. “HDFC customers will have choices to compare before applying for a personal loan or a credit card from HDFC Bank. Similarly, existing HDFC Bank customers will prefer applying for a home loan from the amalgamated mortgage business entity,” says Khosla.

NBFCs do not have to adhere to the external benchmarking regime, but banks have to. What will be the impact of amalgamation on existing and new borrowers?

The home loan rates offered by HDFC Ltd are among the lowest in the country, starting at 6.7 percent. “We expect the home loan interest rates to be competitive even after the amalgamation. A switch to external benchmarking by the mortgage lender may not drive down the rates by more than a few basis points,” says Adhil Shetty, CEO of He adds that the maximum rates may come down a little around those charged by public sector banks (PSBs). So, there may not be an enormous difference between new or existing customers in terms of interest rates.

I am an HDFC deposit holder. What impact will there be on my deposits’ interest rates post-merger?

The deposit is essentially a contract between the depositor and the institution taking the deposit. “So, the deposit rates and the other terms and conditions around the term deposit will continue to hold until the maturity of the deposit,” says Shetty. For instance, let’s say you have a deposit with HDFC maturing in March 2026, with 6.5 percent interest per annum. The interest rate per annum will remain the same until maturity, even if the amalgamation happens during the deposit term. “However, after amalgamation, the deposit rates of HDFC Bank will apply while renewing on maturity or investing a fresh amount in a term deposit,” says Khosla.

What are the key factors I need to be aware of while applying for a credit card, personal loan, auto loan, or investing in any of the cross-selling products offered by HDFC Bank after amalgamation?

HDFC Ltd customers will have a full suite of products to choose from HDFC Bank after amalgamation. As per data shared by the top managements of HDFC Ltd and HDFC Bank at a press conference on Monday, around 70 percent of HDFC’s customers do not bank with HDFC Bank, indicating a significant cross-selling opportunity. Also, close to 80 percent of HDFC Bank customers do not have mortgages, indicating low penetration. “The current friction between sanction and disbursal will go away after amalgamation. There will be opportunities to sell life insurance and non-life insurance products to HDFC customers,” says Thapliyal.

You should compare loan terms and conditions, credit cards, and investment products with existing products of other banks before you plan to apply.

What will happen to HDFC Ltd branches after amalgamation?

HDFC Ltd branches will be retained, but in the future, they could be converted to full-service bank branches.

I have an existing home loan account and deposits with HDFC Ltd. Will there be any operational changes? For instance, a change in account numbers after amalgamation?

Yes. There are bound to change post amalgamation, but this will be a long process, as we have seen with PSU bank mergers in the last couple of years. “It is too soon to say what all may change and how it will affect customers, but you must also keep in mind that HDFC Bank will reach out to them regarding all the changes that are underway from time to time, and customers will have ample time to adapt to them,” says Shetty.

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