Former HDFC Chairman Deepak Parekh has shared an interesting story: ICICI Bank once wanted to merge with HDFC, long before the big HDFC-HDFC Bank merger happened in 2023.
In a conversation with former ICICI Bank CEO Chanda Kochhar on her YouTube channel, Parekh revealed that Kochhar had once told him, “ICICI started HDFC. Why don’t you come back home?” This was her way of suggesting a merger between ICICI and HDFC.
Parekh said he refused the offer because he felt it wasn’t fair, considering HDFC’s strong brand identity.
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The Actual HDFC Merger
Years later, in April 2022, HDFC Bank announced it would merge with HDFC, the mortgage lender, in a huge $40 billion deal. This was officially completed in July 2023, creating one of India’s largest financial institutions.
Parekh explained that the RBI (Reserve Bank of India) had played a key role in pushing the merger, especially since large NBFCs like HDFC were now considered “systemically important.” RBI helped guide the process but didn’t give any special benefits or extra time.
The merger was kept a complete secret—only top lawyers, auditors, and RBI officials knew. Most people only found out when it was reported in the media.
Parekh described the day of the merger as both happy and sad. He said it was good for the country to have large banks to compete globally, like the big Chinese banks.
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How the Banks Are Doing Now
Although HDFC Bank reached a major milestone in 2024 by crossing ₹15 lakh crore in market value, ICICI Bank has been outperforming HDFC Bank in many areas:
- ICICI Bank’s profit grew by 15% in FY25, while HDFC Bank’s grew by 11%.
- Both had similar income from interest, but ICICI had a better profit margin.
- ICICI Bank’s loans and deposits grew by 14%, while HDFC Bank’s loan growth was slower.
One challenge for HDFC Bank is that while the merger added many loans to its portfolio, it didn’t bring in enough new deposits. This made the loan-to-deposit ratio (LDR) go over 100%, meaning the bank had loaned out more money than it had in deposits.
Although HDFC Bank brought the LDR down to 96.5% by the end of FY25, it’s still under pressure to either increase deposits or slow down lending. On the other hand, ICICI Bank’s LDR was at a healthy 82.4%, showing better financial balance.
Parekh’s Final Thoughts
Parekh said that Indian banks need to grow through mergers and acquisitions to stay strong and competitive. He also mentioned that insurance is still not well understood in India and that banks often mis-sell insurance just to earn high commissions.
