HDFC Bank and HDFC (Housing Development Finance Corporation) have become one entity from July 1. Know about its impact on home loan, mutual funds and developer finances.
HDFC Bank and HDFC (Housing Development Finance Corporation) have become one entity from July 1. The merger is not going to have any large impact on the existing home loan customers of HDFC, except for the change in the name of the lender from HDFC to HDFC Bank.
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However, experts believe that the merger will have a positive impact on developer finances and home loan borrowers in future, who may benefit from competition due to the creation of a large entity following the merger. The merger will also have some impact on mutual funds, especially those that have invested previously in HDFC and HDFC Bank.
This article takes a look at the possible impact on existing customers, borrowers and mutual funds, as per experts and the information shared by HDFC Bank.
Impact on Existing HDFC Home Loan Customers
According to Atul Monga, Co-Founder and CEO, Basic Home Loan, the merger could be advantageous for home loan borrowers. “The larger pool of borrowers resulting from the merger may lead to increased competition among lenders, including HDFC Bank. This competition could translate into lower interest rates and more favourable terms for home loan borrowers,” says Monga.
HDFC Bank says the loan account number and contractual terms of loan agreements of existing customers will remain unchanged. The customers will continue to have access to the HDFC Ltd portal post-merger where users can log in using existing credentials and passwords.
The bank also says that the merger will not impact the home loans of borrowers who got their full disbursement recently and the repayment cycle of the loan will remain unchanged. Further, the EMI will be processed as per loan repayment schedule while there will be no change in terms and conditions and applicable interest rates.
However, following the merger, the loan account will be transferred to HDFC Bank. But there will not be any change in login credentials.
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HDFC home loan customers, who have a savings account with HDFC Bank, will be able to access home loan details on the HDFC Bank’s net banking portal.
The bank says that following the merger, the applicable interest rates to home loan accounts will be linked to External Benchmark Lending Rate (EBLR) instead of Retail Prime Lending Rate (RPLR).
“This is in compliance with the regulatory guidelines on floating rate of interest. On the day of the merger there will be no change in ROI and any changes in future will be based on EBLR,” the bank says.
Impact on Developer Finances
Experts say that the merger is going to have a positive impact on developer finances and home loan borrowers.
“The merger of HDFC is expected to have a positive impact on developer finances. The increased lending base and access to low-cost funding through CASA deposits will enable HDFC to be more competitive in the developer business. Developers may benefit from lower interest rates and more favourable terms, which can facilitate the construction of more homes to meet the growing demand for housing in India,” says Monga.
“The merger of HDFC is likely to push developers towards HDFC as a preferred financier due to improved terms and rates. Simultaneously, home loan borrowers may benefit from increased competition among lenders, potentially leading to better loan offers and conditions,” he adds.
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Impact on Mutual Funds
The merger of HDFC Bank and HDFC Ltd will impact equity mutual funds, particularly those with exposure to these stocks, according to Sonam Srivastava, Founder, Wright Research, an investment advisory firm.
“It (merger) could affect the Net Asset Value (NAV) due to price fluctuations triggered by the merger. Mutual funds might need to rebalance portfolios to align with changes in the benchmark indices. The merger may necessitate sector diversification adjustments for some funds, as their exposure to the banking and financial sector might increase,” says Srivastava.
“Multi-cap and focused funds may face heightened concentration risk, and ELSS funds with a lock-in period might experience an impact. Investors should watch fund managers’ portfolio adjustments and review their own investments. As with any significant market event, it is recommended to consult with a financial advisor before making investment decisions,” she adds.
