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Housing Development Finance Corporation (HDFC) has not yet decided if it would pare stake in HDFC Bank. Keki Mistry, vice-chairman and chief executive officer at HDFC, in an interview with Somasroy Chakraborty, says the home finance company’s board has not even discussed this subject. Mistry also shared his views on a possible merger between HDFC and HDFC Bank, the interest rate cycle and the home loan market. Edited excerpts:
A report claims HDFC is planning to cut its stake in HDFC Bank. Is this true?
At this moment, we have no such plans. We have not even had a board meeting to discuss the subject. It is too premature to say HDFC will reduce its stake. If the bank announces a fund-raising programme, our board will naturally discuss whether we will participate or not. It (HDFC’s participation) will depend on a number of things — the size of the issue, the pricing, etc. Hence, it is too early to say HDFC will reduce its stake in HDFC Bank.
Has there been any progress on the proposed merger between HDFC and HDFC Bank?
There has been no discussion but we have always maintained that a merger will make sense in the long term. However, there are a few constraints. Whenever we feel it makes sense for the stakeholders of both HDFC and HDFC Bank, we will discuss it with the regulators and go to the market.
The new bank licensing guidelines proposed creation of a holding company structure. If this rule is applied on existing banks, what kind of organisational restructuring needs to be done in HDFC and HDFC Bank?
We will create a holding company as and when it is required to be done. Right now, it is not mandatory for us. Also, a few changes are required from the perspective of taxation.
Do you expect the Reserve Bank of India to cut rates in December?
The Reserve Bank has been extremely successful in its fight against inflation. The wholesale inflation numbers are sub-two per cent. But my personal view is that the banking regulator will wait a few more months before reducing rates. While I don’t rule out the possibility of a rate cut on December 2. I think the chance of that happening is low. I believe the central bank will start reducing rates from early next year. We will probably see a rate cut in the first quarter (January-March) itself.
Will a rate cut lead to an increase in demand for housing loans?
We have not seen too much correlation between interest rates and home loan demand. But a rate cut will certainly improve sentiments. It could lead to some improvement in demand in metros, where home prices are high. But in smaller towns, I don’t think a rate cut alone will drastically improve home loan demand.
