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HDFC-HDFC Bank merger’s ₹1.5 lakh cr gift to Bajaj Finance
August 30, 2023
With Housing Development Finance Corporation (HDFC) merging into HDFC Bank, about ₹1.5 lakh crore of bank limit is now available for other non-banking financial companies (NBFCs) as well as housing financiers, said analysts.
According to the regulatory cap set by the Reserve Bank of India (RBI), banks cannot have an exposure of over 20 percent of their Tier 1 capital in a single NBFC and over 25 percent in one NBFC group.
As at March 31, 2023, HDFC Ltd’s total borrowings stood at $69.14 billion. Of these, term loans from banks made for 23 percent, roughly amounting to $15.9 billion or ₹1.5 lakh crore. “This exposure of HDFC Ltd to the financial system has moved out of the NBFC/HFC classification,” said analysts.
This does not necessarily mean that the cost of funds will come off, but the quantum of money an NBFC can raise from banks at the same cost is now much higher.
This does not necessarily mean that the cost of funds will come off, but the quantum of money an NBFC can raise from banks at the same cost is now much higher.
While the entire sector stands to benefit, foreign broking firm Nomura thinks this is a big positive for Bajaj Finance and its housing finance subsidiary Bajaj Housing Finance Ltd, from a ‘liability-garnering and finer-pricing perspective’.
“Bajaj Finance has a well-diversified liability franchise, which, coupled with its AAA rating, strong parentage, prudent asset-liability management, and robust track record, has led to declines in the gap of funding cost with large banks over the past few years,” Nomura analysts Ajit Kumar and Param Subramanian wrote in a note dated August 24.
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