In a recent interview, former HDFC chairman Deepak Parekh revealed that Chanda Kochhar, the then ICICI Bank chief, had once proposed a merger between ICICI Bank and HDFC. This proposal was made before HDFC’s eventual reverse merger with its banking subsidiary, HDFC Bank, which was completed in July 2023. Parekh recalled that Kochhar had said, “ICICI started HDFC, why don’t you come back home?” However, Parekh declined the offer, stating that it would not be fair or proper to merge the two institutions.
Parekh attributed the eventual merger with HDFC Bank to regulatory pressure from the Reserve Bank of India (RBI). The RBI had classified non-banking financial companies (NBFCs) like HDFC as systemically important, and Parekh believed that the merger was necessary to comply with regulatory requirements. He noted that the RBI supported the merger and helped facilitate the process, but did not provide any concessions or relief.
Despite the challenges, Parekh believes that the merger was ultimately beneficial for the institution and the country. He stated that large banks are essential for India’s economic growth and that Indian banks must grow through acquisitions to become stronger in the future. Parekh also expressed his optimism about the potential for Indian banks to become larger and more competitive, citing the example of Chinese banks.
On broader economic concerns, Parekh identified persistent uncertainty in supply chains, trade policy, and export conditions as top CEO concerns. He also criticized the mis-selling of insurance products by banks, driven by high upfront commissions, and described insurance as the “least understood product”. Overall, Parekh’s comments provide insight into the complexities of India’s financial sector and the challenges faced by its leaders. His reflections on the merger and the state of the economy offer a unique perspective on the opportunities and challenges facing Indian businesses and policymakers.