Bandhan Bank is a financial investment for us, while HDFC Bank is a strategic investment: Deepak Parekh

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

Talk about the synergies behind the merger of Gruh Finance Ltd with Bandhan Bank Ltd through a share-swap deal? 
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. It, 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 Rs33,000 crore through deposits. 

Bandhan has its presence majorly in eastern India and its merger with Gruh will enable them, Bandhan, to enter a new area of housing, where it is not present yet; bring the expertise of staffs and a roadmap and access to western India. 

But, the merger between HDFC and Gruh will give birth to conflict of interest, as both of us are present in western India as a non-banking company. In addition, we are engaged in offering small loans like a credit link scheme in the government’s cash link subsidy scheme that offers a subsidy of Rs2-2.50 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. Guru also wants to do the same and here comes to conflict of interest between the two. 

Apart from this, the loan amount, which stood around Rs20-25 lakhs earlier, is also going down due to an increase in the number of EWS applications like EWS LIG. And, this gives birth to stocks, which is low in affordable homes, and our exposure will increase only if the builders will start building more homes in the segment, which may lead to a conflict of interest in future. 

Let us know the per cent of the stake that you, HDFC, will have in Bandhan? And, are you confident about the approvals?
The merger will need approval from shareholders, competitions and RBI. We will wait and watch what pops up. There is a distinction and that is that HDFC bank is our strategic investment while Bandhan Bank is our financial investment, which can be sold but strategic must not be sold. 

Bandhan is a financial investment like RBL bank, where we had 4.5 per cent 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?
It is a big question. 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, that is expanding and placing capital orders; steel sector, which is quite buoyant and expanding and construction, where road and airport construction are at its peak. Thus, all these are the positive signs of the country. So, I am very confident and optimistic about the future of the country. 

Also, tell something about the challenges?
Challenges is related to the speed of implementation of projects like construction permits are 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 was not able to get insurance and regulatory permission, we have bought L&T insurance I feel, more consolidation can be seen in the financial sector in time to come. 

It means consolidation process is here to stay?
Yes, the consolidation process will remain active and we are also looking on opportunities. 

Are you eyeing something in general insurance?
Yes, but value creation should be there.