Housing Development Finance Corporation (HDFC) managing director Keki Mistry today ruled out transforming the company into a universal bank via a merger with HDFC Bank. He said both the organisations were growing independently at a healthy clip of around 30 per cent per annum and performing well in their respective niche areas.
"We do not see any advantage in transforming ourselves into a universal bank. Both HDFC and the bank are optimally staffed, hence there is no scope for redeployment and also there is no excess real estate available," Mistry said.
He pointed out that there was the danger of running an asset-liability mismatch by channeling short-term funds in savings bank and current accounts into the housing sector, which typically have a long tenors.
Presently, a housing finance company is not subject to cash reserve ratio (CRR) requirements as they are precluded from raising funds under the savings bank and current accounts. The statutory liquidity ratio (SLR) is pegged at 12.5 per cent against banks' 25 per cent.
Once HDFC transforms itself into a universal bank through a merger with HDFC Bank it will be subject to 7.5 per cent CRR and 25 per cent SLR requirement.
Mistry further pointed out that dealing with multiple regulatory bodies that govern the banking, capital markets and the insurance sectors was another impediment for conversion into a universal bank.
HDFC's retail business is growing at 40 per cent per annum. Renu Karnad, executive director, said that taking into account tax benefits for investment in housing, the cost of a housing loan for a person in the 30 per cent tax bracket works out to only around 8.5 per cent.
To mark the 25th year of HDFC's existence, a special discount of one per cent on processing and administration fees was being offered for housing loans for one month beginning today, she said, adding that the fee will be only 0.8 per cent as against the normal fee of 1.8 per cent.
