No need to pay off parent firm's liabilities on day 1 of merger: HDFC Bank

Liabilities of HDFC Ltd will be transferred to HDFC Bank upon their merger and there is no need to pay off such dues on the very first day of the merger, the lender said on Thursday.

The country's largest private sector bank by balance sheet size is set to merge its parent mortgage lender Housing Development Finance Corporation Ltd (HDFC Ltd) with itself.

HDFC Bank said it has not approved any plans to raise funds to pay towards such liabilities of HDFC Ltd.

"As per the proposed composite scheme of amalgamation, the liabilities of HDFC Limited will be transferred to the bank and will be serviced and repaid by the bank as per the contracted maturity," HDFC Bank said in a regulatory filing.

The bank is not required to pay off any amount of liability of HDFC Ltd on day one of the merger unless coincidentally any particular liability happens to mature on the same date.

HDFC Bank has already received in-principle approval from the Reserve Bank (RBI) for the merger with HDFC Ltd, among other approvals.

The parent-subsidiary merger is seen as the biggest transaction in India's corporate history.

In April this year, HDFC Bank and HDFC Ltd announced the merger proposal in which the lender will take over the mortgage lender for about USD 40 billion in about 18 months.

The information provided by the lender comes as a clarification in response to a news report, which stated that HDFC Bank is required to raise over Rs 2.2 trillion in order to pay off HDFC Ltd's liability when the merger between them comes to effect.

HDFC Bank said the news report is factually incorrect and speculative.

The stock of HDFC Bank traded at Rs 1,427.65 apiece on BSE, down 0.38 per cent.