The merger of HDFC Ltd with HDFC Bank may be completed ahead of the indicated deadline by one or two quarters. It could end by the first quarter of FY24 instead of the third quarter.

“The way it is going, the merger could be completed by Q1 or Q2 of FY24. We could be ahead of schedule by one or two quarters,” said HDFC Bank chief financial officer Srinivasan Vaidyanathan during in a post-earnings analyst call on Saturday.

 On Friday, HDFC Bank received approval from the National Company Law Tribunal (NCLT) to hold a shareholders' meeting on 25 November to vote on the proposed merger.

 On 4 April this year, the country’s largest housing finance company HDFC Ltd announced that it would merge with HDFC Bank in a deal valued at $40 billion.

 deal, creating a financial services behemoth. The indication was that the merger could be completed by the second or third quarter of FY24.

 On the bank’s request for a gradual compliance of reserve norms post the merger, Vaidyanathan said it is engaged in talks with the Reserve Bank of India (RBI).  The bank had requested the RBI to allow a phased approach to comply with regulatory requirements, such as cash reserve ratio (CRR) and statutory liquidity ratio (SLR), as well as norms on priority sector lending.

“I think we are going to do 142,000 villages. We were less than 100,000 villages if you go back 12-15 months ago. From here, we’ll be on track to go to 200,000 villages. We are on track to organically build this,” he said.

As per the RBI regulation, 40% of banks’ adjusted net credit must be extended to the priority sector. This includes agriculture and micro, small and medium enterprises (MSME).

Vaidyanathan said the bank’s margin could get a boost in a tightening monetary cycle as the RBI hikes interest rates to combat inflation. HDFC Bank typically operates with a margin of 3.94-4.45%. In the quarter ended 30 September, HDFC Bank’s core net interest margin stood at 4.1% on total assets and 4.3% based on interest-earning assets.

He said that over the past couple of years, the bank’s mix between retail and wholesale loans had switched.

“Retail is now at 45% while wholesale is at 55%. It’s switched, we are at the lower end of that range and now the rate cycle is going up. So, you’re seeing some slight pick-up in the margin,” he said.

HDFC Bank reported a 20.1% year-on-year increase in net profit to Rs 10,605.8 crore in the fiscal second quarter ended September.

HDFC Bank’ marked-to-market (MTM) loss in the quarter stood at Rs 253 crore due to a sharp rise in short-term benchmark government bond yields even as the yield on the 10-year benchmark paper fell 5 basis points, Vaidyanathan pointed out.

The losses were mainly incurred on corporate bond investments and those on pass-through certificates, including priority sector loan certificates.

HDFC Bank has the scope to grow customer penetration in the time deposit segment, Vaidyanathan said. As of now, 14-15% of the bank’s customers have time deposits, he added.

The bank’s time deposits grew 22% year-on-year to Rs 9.1 trillion in the September quarter while total deposits rose 19% to Rs 16.7 trillion. CASA (current account savings account) deposits rose 15% while the CASA ratio fell to 45.4%.

HDFC Bank continued to focus on deposit mobilisation and branch expansion. The private lender added 121 branches in the September quarter and 157 in the first half of the current fiscal. Another 521 branches are close to opening in the second half.