HDFC And HDFC Bank May Merge To Form The Second Largest Bank In India

Home financier HDFC and HDFC Bank may merge to create the second largest bank in terms of assets after the State Bank of India (SBI) if "economies of scale prove beneficial" to both.

Ever since the Reserve Bank of India (RBI) allowed banks to float special infrastructure bonds, exempting them from reserve requirements and priority sector responsibilities, there have been murmurs of a possible merger between HDFC Bank and its parent HDFC.

As per RBI regulations, a bank needs to set aside 4% of its deposits as cash reserve ratio and 22.5% in government bonds. So HDFC would have to transfer its assets to the bank.

Paresh Sukthankar, deputy managing director, HDFC Bank, said after announcing its quarterly financial results, "The regulations by themselves do not warrant a merger. We will have to study the ramifications and see whether there is some merit on coming back to the drawing board."

However, HDFC Bank has told the Bombay Stock Exchange that the media reports on the merger is erroneous and no such proposal is being considered.