Mumbai: The Fusion Of housing finance Major HDFC with its banking subsidiary HDFC bank Will be effective from July 1, HDFC chairman Deepak Parekh said on Tuesday. He said the boards of HDFC and HDFC Bank will meet on June 30 to finalize the merger.
HDFC will rely on a culture of trust to preserve the legacy
HDFC Chairman Deepak Parekh said, “Buying a home is the biggest investment a family makes in terms of acquisition cost. They keep running from door to door to meet the balance requirement and have a lot of questions. ” The culture that HDFC fosters is one where employees listen to the concerns of each family and try to answer questions such as whether they can trust the builder or are paying the right price for their home. Parekh expects HDFC Bank to follow the same culture.
One of the conditions that HDFC has set for the merger with HDFC Bank is that the bank will absorb all its employees, and the erstwhile HDFC employees will continue to be involved in housing finance. While this protects employees who are performing only one type of activity, it also aims to introduce the HDFC culture of personalized service in the bank.
But maintaining the culture will be a challenge as the erstwhile HDFC employee base will exceed 4,000, while the number for the bank is over 1,70,000. “Now in a bank that doesn’t offer housing, the culture should be different because they offer auto, personal and unsecured loans,” Parekh said.
According to HDFC VC and CEO Keki Mistry, there will be some changes in the working style after the merger. “The sanctioning authority will change as RBI does not allow marketing people to sanction loans. We were a small organization and could do that. They would have to work in silos. He can’t have any role, and the evaluation and approval teams should be separate,” Mistry said.
An indication of HDFC’s orthodoxy is that the organization did not innovate much with home loan products by offering ‘teaser loans’ like some of its rivals during the global financial crisis. This accounts for only 0.04% of the total number of individual customer loans that have been forgiven since the corporation began operations. According to Mistry, HDFC Bank also has a conservative culture, which is reflected in its low level of non-performing assets.
Days before the merger, HDFC launched the HT Parekh Legacy Center to preserve the memory of its founder. Deepak Parekh’s uncle HT Parekh founded HDFC in 1977 after his retirement as chairman of ICICI when he was 67.
The formation of HDFC was the culmination of a lifelong dream for HT Parekh, who wanted to replicate the housing finance model in India after seeing how building societies in the UK had made a difference during his student days in London. At that time, home loans were a taboo area for financial institutions, and most Indians could buy homes only when they were close to retirement.
The founders were against floating banks in the 90s
The opening of the legacy center before the merger was significant because unlike HDFC, which owes its existence to HT Parekh, the bank was formed despite doubts about the senior Parekh’s foray into the banking business. He realized that banks were too big an institution and too cumbersome for HDFC, which was a small group of people.
HDFC will rely on a culture of trust to preserve the legacy
HDFC Chairman Deepak Parekh said, “Buying a home is the biggest investment a family makes in terms of acquisition cost. They keep running from door to door to meet the balance requirement and have a lot of questions. ” The culture that HDFC fosters is one where employees listen to the concerns of each family and try to answer questions such as whether they can trust the builder or are paying the right price for their home. Parekh expects HDFC Bank to follow the same culture.
One of the conditions that HDFC has set for the merger with HDFC Bank is that the bank will absorb all its employees, and the erstwhile HDFC employees will continue to be involved in housing finance. While this protects employees who are performing only one type of activity, it also aims to introduce the HDFC culture of personalized service in the bank.
But maintaining the culture will be a challenge as the erstwhile HDFC employee base will exceed 4,000, while the number for the bank is over 1,70,000. “Now in a bank that doesn’t offer housing, the culture should be different because they offer auto, personal and unsecured loans,” Parekh said.
According to HDFC VC and CEO Keki Mistry, there will be some changes in the working style after the merger. “The sanctioning authority will change as RBI does not allow marketing people to sanction loans. We were a small organization and could do that. They would have to work in silos. He can’t have any role, and the evaluation and approval teams should be separate,” Mistry said.
An indication of HDFC’s orthodoxy is that the organization did not innovate much with home loan products by offering ‘teaser loans’ like some of its rivals during the global financial crisis. This accounts for only 0.04% of the total number of individual customer loans that have been forgiven since the corporation began operations. According to Mistry, HDFC Bank also has a conservative culture, which is reflected in its low level of non-performing assets.
Days before the merger, HDFC launched the HT Parekh Legacy Center to preserve the memory of its founder. Deepak Parekh’s uncle HT Parekh founded HDFC in 1977 after his retirement as chairman of ICICI when he was 67.
The formation of HDFC was the culmination of a lifelong dream for HT Parekh, who wanted to replicate the housing finance model in India after seeing how building societies in the UK had made a difference during his student days in London. At that time, home loans were a taboo area for financial institutions, and most Indians could buy homes only when they were close to retirement.
The founders were against floating banks in the 90s
The opening of the legacy center before the merger was significant because unlike HDFC, which owes its existence to HT Parekh, the bank was formed despite doubts about the senior Parekh’s foray into the banking business. He realized that banks were too big an institution and too cumbersome for HDFC, which was a small group of people.