Effects of HDFC-HDFC Bank merger go beyond banking: Rajnish Kumar

The effect of the HDFC-HDFC Bank merger will be for the bigger space of the Indian financial sector and not just limited to the banking sector. The large finance companies have practically no benefit of regulatory arbitrage. Earlier, such arbitrage between banks and NBFCs was normal.

The logic of the merger is very clear — the cost of borrowing of banks is lower. The finance companies, including housing finance entities, have to rely on wholesale fund-raising from the market or borrowings from banks, both of which are relatively costly. Above a certain size, it becomes difficult to rely solely on the wholesale