A mega-merger in India that has created one of the world's largest banks marks a milestone for the country's banking sector, industry experts have said.
At the same time, the move will intensify competition between lenders in Asia's third-largest economy, they added.
India's biggest private lender HDFC Bank merged with mortgage issuer Housing Development Finance Corporation on July 1.
The merged entity becomes the fourth-largest bank in the world, valued at $172 billion. This is the first time an Indian bank has ranked among the world's most valuable lenders.
“This is a very significant development that indicates the rising strength of the Indian financial system on the world economic map,” said Jyoti Prakash Gadia, managing director of investment bank Resurgent India.
“The merger will create a situation of healthy competition among the top public and private sector banks in India,” said Mr Gadia.
“Private entities like HDFC Bank are comparatively more nimble-footed and faster to innovate and adapt to change”.
However, “public sector banks will also need to go in for reforms to stay competitive”, he added.
Following the tie-up, HDFC Bank now has more than 120 million customers, over 8,000 branches and roughly 177,000 employees.
In terms of market capitalisation, it towers above its nearest rivals, the State Bank of India (SBI) and private lender ICICI Bank, which are valued at $62 billion and $79 billion, respectively, according to data from Bloomberg News.
The figures show that HDFC outpaces its four largest competitors in the country in terms of deposit growth. Investor confidence is also high, with the bank's riskiest convertible bonds performing better than its global peers, according to Bloomberg.
These metrics could be set to improve, analysts said.
HDFC's new status “elevates the bank's reputation”, making it more attractive to global investors, and “fostering increased confidence in the Indian banking sector as a whole”, said Ameet Venkeshwar, chief business officer at LoanTap, an online lending platform.
“For India's banking sector, the merger signifies a shift in the landscape,” he added.
“The emergence of a private sector bank that surpasses nationalised banks like the SBI in size and value reflects the growing prominence of private institutions in the country.”
Analysts believe that the banking sector could be set for further mergers.
“This development could spur other banks and financial institutions to explore similar opportunities for consolidation or strategic partnerships to remain competitive and expand their market presence,” said Mr Venkeshwar.
For the merged HDFC entity, having its combined pool of customers from the bank and from the mortgage lender creates enormous scope for growth, by offering new home loan products to its clients with its bank accounts, and getting its home loan customers to open up bank accounts.
The merger provides a “strategic advantage” to the bank, according to Prashant Bhonsle, founder of Kuhoo FinTech.
“This merger provides them with an opportunity to underwrite large ticket size loans inclusive of the infrastructure portfolio,” said Mr Bhonsle.
“The merged entity not only now has access to the larger customer base but will also be able to provide customers with varied products and services along with competitive pricing.”
As it shakes up the banking sector, this will ultimately benefit the consumer, he added.
HDFC Bank's shares hit record highs following the merger.
“The merger of HDFC and HDFC Bank is expected to have a positive impact on the bank,” said Abhishek Jain, head of research at Arihant Capital Markets.
“It will create synergies in terms of cost-saving efficiency and cross-selling opportunities. Additionally, the merger is anticipated to result in lower costs for the HDFC book in the future, further enhancing the bank's overall performance and profitability.”
The move can also help further bolster India's banking sector, according to Mr Jain.
“This merger will provide more power to the Indian banking sector in terms of balance sheet strength and customer base, contributing to its overall growth and influence,” he said.
The move comes as the country's banking sector is becoming more robust, experts said, although non-performing assets remain a concern.
The burden of bad debt has plagued Indian lenders for years. But authorities in recent years have taken steps to lower the ratio of non-performing loans and clean up banks' balance sheets.
“The outlook for India's banking sector is highly positive in both the near term and the long term,” said Mr Jain.
“Despite tougher regulations, there has been a significant improvement in asset quality. The banking sector has emerged relatively unscathed from the impact of the Covid-19 pandemic.”
He added that strong corporate and rural demand in the world's most populous country, “coupled with a robust balance sheet post the clean-up phase, contribute to the optimistic outlook for the sector”.
Mr Gadia agreed that HDFC's merger comes as the outlook for the sector has brightened.
“Cautious lending, supported by government policies during the pandemic, better handling of NPAs, and a favourable interest spread has led to improved profitability of banks in general,” he said.
“The banking sector is expected to do well, provided the banks continue to operate effectively while avoiding reckless lending in risky projects and financial frauds.”
However, some risks remain.
“While new opportunities to grow are emerging, the banking sector continues to face the challenges of potential NPAs in the retail and MSME [micro, small and medium enterprises] sector and comparatively high operational costs,” said Mr Gadia.
“An adverse interest rate cycle can also impact the currently high net interest margins.”
Analysts say that India's population of more than 1.4 billion, young demographic, and push for financial inclusion are all factors that can support growth in the banking sector – and HDFC has placed itself in a prime position to capitalise on this.
The Indian banking system “has been moving towards fee-based income for some time, given their focus on maximising risk adjusted returns on capital”, said Vivek Iyer, partner at Grant Thornton Bharat.
For a bank to maximise this fee-based income, “[a] large scale is extremely imperative”, he said.
With HDFC's merger creating one of the largest financial institutions in the world, this allows it to achieve “a scale that would be needed for an Indian bank, given the role that India is expected to play in the larger global world order, while maximising risk adjusted returns on capital”, Mr Iyer said.
Nadiya Sarguroh, a principal associate at MZM Legal, said HDFC will certainly profit from the merger, but it could see India “racing towards a monopolistic credit economy”.
“This fast track button threatens other large ticket banks in India putting many competitive banks on the back foot,” she said.
However, many are hopeful that the merger could ultimately bring wider benefits to the Indian economy.
“As a result of the merger, HDFC Bank is set to yield bigger loans for infrastructure development, expanded availability of cost-effective housing loans and reduced interest rates for prospective homeowners,” said Ashish Kukreja, founder and chief executive of Homesfy.in, an Indian real estate brokerage.
“Developers may enjoy lower interest rates and more favourable terms,” he added.
“This may lead to the construction of more houses to meet India's growing housing demand.”
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The specs
Engine: 4.0-litre flat-six
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Fuel economy, combined: 13.8L/100km
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Under ‘snapback’, measures imposed on Iran by the UN Security Council in six resolutions would be restored, including:
- An arms embargo
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Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
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Price: On request
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Who are the Sacklers?
The Sackler family is a transatlantic dynasty that owns Purdue Pharma, which manufactures and markets OxyContin, one of the drugs at the centre of America's opioids crisis. The family is well known for their generous philanthropy towards the world's top cultural institutions, including Guggenheim Museum, the National Portrait Gallery, Tate in Britain, Yale University and the Serpentine Gallery, to name a few. Two branches of the family control Purdue Pharma.
Isaac Sackler and Sophie Greenberg were Jewish immigrants who arrived in New York before the First World War. They had three sons. The first, Arthur, died before OxyContin was invented. The second, Mortimer, who died aged 93 in 2010, was a former chief executive of Purdue Pharma. The third, Raymond, died aged 97 in 2017 and was also a former chief executive of Purdue Pharma.
It was Arthur, a psychiatrist and pharmaceutical marketeer, who started the family business dynasty. He and his brothers bought a small company called Purdue Frederick; among their first products were laxatives and prescription earwax remover.
Arthur's branch of the family has not been involved in Purdue for many years and his daughter, Elizabeth, has spoken out against it, saying the company's role in America's drugs crisis is "morally abhorrent".
The lawsuits that were brought by the attorneys general of New York and Massachussetts named eight Sacklers. This includes Kathe, Mortimer, Richard, Jonathan and Ilene Sackler Lefcourt, who are all the children of either Mortimer or Raymond. Then there's Theresa Sackler, who is Mortimer senior's widow; Beverly, Raymond's widow; and David Sackler, Raymond's grandson.
Members of the Sackler family are rarely seen in public.
Killing of Qassem Suleimani
KILLING OF QASSEM SULEIMANI
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
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Conflict, drought, famine
Estimates of the number of deaths caused by the famine range from 400,000 to 1 million, according to a document prepared for the UK House of Lords in 2024.
It has been claimed that the policies of the Ethiopian government, which took control after deposing Emperor Haile Selassie in a military-led revolution in 1974, contributed to the scale of the famine.
Dr Miriam Bradley, senior lecturer in humanitarian studies at the University of Manchester, has argued that, by the early 1980s, “several government policies combined to cause, rather than prevent, a famine which lasted from 1983 to 1985. Mengistu’s government imposed Stalinist-model agricultural policies involving forced collectivisation and villagisation [relocation of communities into planned villages].
The West became aware of the catastrophe through a series of BBC News reports by journalist Michael Buerk in October 1984 describing a “biblical famine” and containing graphic images of thousands of people, including children, facing starvation.
Band Aid
Bob Geldof, singer with the Irish rock group The Boomtown Rats, formed Band Aid in response to the horrific images shown in the news broadcasts.
With Midge Ure of the band Ultravox, he wrote the hit charity single Do They Know it’s Christmas in December 1984, featuring a string of high-profile musicians.
Following the single’s success, the idea to stage a rock concert evolved.
Live Aid was a series of simultaneous concerts that took place at Wembley Stadium in London, John F Kennedy Stadium in Philadelphia, the US, and at various other venues across the world.
The combined event was broadcast to an estimated worldwide audience of 1.5 billion.
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How much do leading UAE’s UK curriculum schools charge for Year 6?
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Engine: 4.4-litre twin-turbo V-8 petrol enging with additional electric motor
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Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
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Dubai Rugby Sevens
November 30, December 1-2
International Vets
Christina Noble Children’s Foundation fixtures
Thursday, November 30:
10.20am, Pitch 3, v 100 World Legends Project
1.20pm, Pitch 4, v Malta Marauders
Friday, December 1:
9am, Pitch 4, v SBA Pirates
ETFs explained
Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.
ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.
There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.
The five pillars of Islam
Red flags
- Promises of high, fixed or 'guaranteed' returns.
- Unregulated structured products or complex investments often used to bypass traditional safeguards.
- Lack of clear information, vague language, no access to audited financials.
- Overseas companies targeting investors in other jurisdictions - this can make legal recovery difficult.
- Hard-selling tactics - creating urgency, offering 'exclusive' deals.
Courtesy: Carol Glynn, founder of Conscious Finance Coaching
Company profile
Name: Back to Games and Boardgame Space
Started: Back to Games (2015); Boardgame Space (Mark Azzam became co-founder in 2017)
Founder: Back to Games (Mr Azzam); Boardgame Space (Mr Azzam and Feras Al Bastaki)
Based: Dubai and Abu Dhabi
Industry: Back to Games (retail); Boardgame Space (wholesale and distribution)
Funding: Back to Games: self-funded by Mr Azzam with Dh1.3 million; Mr Azzam invested Dh250,000 in Boardgame Space
Growth: Back to Games: from 300 products in 2015 to 7,000 in 2019; Boardgame Space: from 34 games in 2017 to 3,500 in 2019
MATCH INFO
Uefa Champions League semi-finals, first leg
Liverpool v Roma
When: April 24, 10.45pm kick-off (UAE)
Where: Anfield, Liverpool
Live: BeIN Sports HD
Second leg: May 2, Stadio Olimpico, Rome
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
The distance learning plan
Spring break will be from March 8 - 19
Public school pupils will undergo distance learning from March 22 - April 2. School hours will be 8.30am to 1.30pm
Staff will be trained in distance learning programmes from March 15 - 19
Teaching hours will be 8am to 2pm during distance learning
Pupils will return to school for normal lessons from April 5
T20 WORLD CUP QUALIFIERS
Qualifier A, Muscat
(All matches to be streamed live on icc.tv)
Fixtures
Friday, February 18: 10am Oman v Nepal, Canada v Philippines; 2pm Ireland v UAE, Germany v Bahrain
Saturday, February 19: 10am Oman v Canada, Nepal v Philippines; 2pm UAE v Germany, Ireland v Bahrain
Monday, February 21: 10am Ireland v Germany, UAE v Bahrain; 2pm Nepal v Canada, Oman v Philippines
Tuesday, February 22: 2pm Semi-finals
Thursday, February 24: 2pm Final
UAE squad:Ahmed Raza(captain), Muhammad Waseem, Chirag Suri, Vriitya Aravind, Rohan Mustafa, Kashif Daud, Zahoor Khan, Alishan Sharafu, Raja Akifullah, Karthik Meiyappan, Junaid Siddique, Basil Hameed, Zafar Farid, Mohammed Boota, Mohammed Usman, Rahul Bhatia
The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
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VEZEETA PROFILE
Date started: 2012
Founder: Amir Barsoum
Based: Dubai, UAE
Sector: HealthTech / MedTech
Size: 300 employees
Funding: $22.6 million (as of September 2018)
Investors: Technology Development Fund, Silicon Badia, Beco Capital, Vostok New Ventures, Endeavour Catalyst, Crescent Enterprises’ CE-Ventures, Saudi Technology Ventures and IFC
Company profile
Name: Steppi
Founders: Joe Franklin and Milos Savic
Launched: February 2020
Size: 10,000 users by the end of July and a goal of 200,000 users by the end of the year
Employees: Five
Based: Jumeirah Lakes Towers, Dubai
Financing stage: Two seed rounds – the first sourced from angel investors and the founders' personal savings
Second round raised Dh720,000 from silent investors in June this year
Origin
Dan Brown
Doubleday
