Deepak Parekh Reveals Chanda Kochhar's ICICI-HDFC Merger Proposal

In a recent interview, Deepak Parekh, the former chairman of HDFC Ltd, disclosed that Chanda Kochhar, the former CEO of ICICI Bank, had once suggested a merger between ICICI Bank and HDFC. This revelation was shared during a candid discussion on Kochhar’s YouTube channel, highlighting an intriguing piece of banking history that had never been publicly addressed before. Parekh recounted the conversation, stating, "I remember you talking to me once. I remember it very clearly. It’s never been talked about in public, but I’m willing to share it now." Kochhar’s proposal emphasized the historical connection between the two institutions, given that HDFC Ltd was initially supported by ICICI Ltd, the predecessor of ICICI Bank. Parekh, however, ultimately declined the merger proposal, reasoning that it would not be appropriate due to the reputational implications for both organizations.

This disclosure comes alongside the context of the recent merger between HDFC and HDFC Bank, which was finalized in July 2023. Parekh also elaborated on this merger, noting that it was significantly influenced by regulatory pressures. According to Parekh, the Reserve Bank of India (RBI) played a substantial role in facilitating this merger, which was aimed at creating a stronger banking entity in India. He stated, "RBI supported us and they pushed us into it to some extent and they helped us. However, there were no concessions, no relief, no time, nothing," acknowledging that while the regulatory body was instrumental, the process was still challenging.

The merger between HDFC and HDFC Bank was reportedly kept confidential until its announcement, with Parekh indicating that only a select group of legal and financial advisors were aware of the proceedings. He reflected on the day the merger was finalized, describing it as both a "sad day and a happy day," recognizing the loss of an independent entity while also acknowledging the potential for growth and stability in a larger financial institution.

Parekh emphasized the importance of consolidation within the Indian banking sector, arguing that larger banks are essential for the future resilience of the industry. "Indian banks must grow through acquisitions to become stronger in future," he remarked, suggesting that mergers can lead to enhanced capabilities and competitiveness in an increasingly globalized financial landscape.

This narrative not only sheds light on the dynamics between two of India’s major financial institutions but also raises questions about the implications of regulatory influence in corporate mergers. As the landscape of Indian banking evolves, the significance of such mergers in fostering robust financial entities becomes increasingly apparent. The discussions surrounding these developments will likely continue, particularly as other financial institutions evaluate their strategies in response to the changing regulatory environment and market conditions.