HDFC Ltd merged with HDFC Bank to gain access to the bank’s deposits and customer base and grow its housing loan business.
PS Investor Club’s Argument
If housing loans use the bank’s funding, what happens to the growth of personal loans and other businesses? Bank deposits are limited, and management must decide where to allocate them.
But my biggest question is this:
Was HDFC Ltd’s management unable to develop a strong, independent, long-term funding model?
Why couldn’t it build its own funding ecosystem through bonds, debentures, institutional investors or another innovative financial structure?
“Funding is the backbone of any lending business. If management cannot build a sustainable funding strategy, how can it expect the business to grow independently for decades?”