HDFC Bank-HDFC merger: Regulatory changes for NBFCs proved decisive

Regulatory changes by the Reserve Bank of India (RBI) aimed at narrowing the arbitrage enjoyed by non-banking financial companies (NBFCs) proved to be the decisive factor in the amalgamation of mortgage financier HDFC into HDFC Bank, India’s largest private sector lender.

On Monday, HDFC and HDFC Bank announced their boards had approved an all-stock amalgamation of the former into the latter, subject to regulatory approvals. At present, HDFC is the parent company of the bank.

Over the years, the RBI has been harmonising regulations between NBFCs and banks in the wake of the many defaults in the shadow banking space.