HDFC Bank set to meet liquidity norms post-merger

HDFC Bank Ltd, India’s biggest private lender, is comfortably placed to meet reserve ratio requirements post its merger with parent HDFC Ltd, even as it awaits a final view from the central bank on requests for forbearance, three sources told Reuters.

The $40 billion merger, announced last April, is expected to conclude by July, HDFC Bank’s Chief Financial Officer Srinivasan Vaidyanathan told analysts at a conference call on Saturday.

The lender has requested the Reserve Bank of India (RBI) for a phased approach to meet the requirements for statutory liquidity ratio (SLR) – the percentage of deposits that banks invest in government bonds – and the cash reserve ratio (CRR), or the portion of deposits that banks must hold in liquid cash, bank executives have said.

The requirements for CRR and SLR for banks are set at 4.5% and 18%, respectively, which is higher than deposit-taking housing finance companies.

While housing finance companies do not have to maintain CRR, such deposit-taking entities have to keep a SLR that is lower than banks.

Though the RBI has yet to respond to the requests, the bank has been expanding its investment book and accumulating government securities since the merger was announced.