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HDFC Ltd and HDFC Bank will continue to function as independent entities until the scheme of merger becomes effective, said HDFC Ltd Chairman Deepak Parekh on Monday.
At a press conference after the merger between the two was announced, Parekh also said he would not be a part of the board of the combined entity but HDFC Ltd Vice-Chairman and CEO Keki Mistry would be.
“The process will take 12-18 months due to the numerous approvals. RBI rules do not allow anyone above 75 years of age to be on board of the bank. I have already crossed that age. I won’t be on board of the bank,” Parekh said.
He. however, said that Mistry is only 67 years old and he would be a director on the board.
“He doesn’t want to be a full time executive. He can handle the investor function and mortgage. I leave it to Sashi and Keki to see,” Parekh said.
“It is a merger of equals, a friendly merger, not at all hostile. As the son grows older, he acquires the father’s business, that’s all that is happening,” Parekh said.
However, discussions on the board structure are premature as of now, he explained.
HDFC Bank Chairman Atanu Chakraborty said the board composition would be addressed in discussion with the regulator — the Reserve Bank of India.
“The board of a bank has a very robust corporate governance structure; it will follow the RBI guidelines. Within HDFC board, extremely capable directors are there for whom there is adequate requirement and space within HDFC Bank,” he noted.
Parekh said HDFC Ltd has also sought time from the RBI for meeting SLR and CRR norms in HDFC’s book. It can be compliant on all new loans.
“We are hopeful of getting the permission soon,” he said.
Permission has also been sought for the bank to continue holding stake in HDB Financial Services and to hold on and if needed increase stake in HDFC Life Insurance.
“We have requested the RBI to give approval for the bank to hold investment in other subsidiaries, similar to approval to other banks, which hold subsidiaries. We would like to hold stake in HDFC Life from the current level of 48 per cent to 50 per cent so that it remains a subsidiary of HDFC Bank,” Mistry explained.
The merger is expected to give an opportunity to cross-sell products to customers of both HDFC Ltd and HDFC Bank.
“Mortgage is still a small proportion on our loan compared to other banks,” Sashi Jagdishan, CEO and MD, HDFC Bank said.
Parekh noted that only 30 per cent of HDFC’s customers have bank accounts with HDFC Bank.
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