IDFC First Bank is anticipating robust credit expansion as a result of its merger with IDFC Ltd., said the CEO, V. Vaidyanathan. The bank's board gave its approval to the merger last week, which is only the latest in a succession of mergers in India's financial sector. Close on the heels of this, the union of HDFC Bank and Housing Development Finance Corporation, India's largest private bank and biggest mortgage provider respectively, was announced with an estimated value of $40 billion.
Vaidyanathan, the managing director and CEO of IDFC First Bank, is confident that the bank's recently approved merger with IDFC Ltd. will lead to robust credit growth. This is concurrent with the $40 billion merger between India's largest private lender HDFC Bank and the country's biggest mortgage lender, Housing Development Finance Corporation. He also believes that India is on a "massive trajectory" which will provide a significant growth potential for the merged entity. He said, in an interview with CNBC's "Street Signs Asia," that a fair expectation for India's credit market is a 15% growth and for the bank itself, a 25% credit growth with stable asset quality.
IDFC First Bank recently proclaimed that the proposed merger is expected to increase the bank's standalone book value by 4.9%, relative to the figures from March 31. Additionally, it is projecting to expand its balance sheet by 20-25% on average in the near to medium term. The bank also stated that such a merger would permit the simplification of the corporate structure of IDFC FHCL, IDFC Limited and IDFC FIRST Bank through the uniting of these entities into one single entity, which would in turn facilitate the compliance with regulatory rules. Vaidyanathan pointed out the bank has certain "strategic goals" and since it is still a small participant within the Indian market, he believes that through such a merger, IDFC First Bank can develop at a good pace over a considerable time period.Nevertheless, the deal is still subject to the approval of India's prominent regulatory authorities, such as the Reserve Bank of India, Securities and Exchange Board of India and India's stock exchanges.Commentators have indicated that the recent merger will not impede IDFC First Bank from being included in the MSCI standard index for August.Vaidyanathan expressed that inclusion in the index would be an immense achievement. "Whether we make it now or later, we have no doubt. We are very certain and, indeed, it would be an honor to become a part of MSCI index," the CEO affirmed.
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