The merging of $ 40 billion proposed between the largest private sector banks in India and mortgage providers has been driven by more stringent regulations than the Shadow banking sector, according to the executive of pioneering the agreement.

Merging HDFC Bank and Housing Corporation Development (HDFC) will be the biggest in the country’s history and create Behemoth financial services. The combined company will have an asset base of $ 340 billion, according to Fitch Ratings, doubling the rival size that is closest to ICICI Bank.

Deepak Parekh, Chair of the HDFC, said the agreement was partly motivated by the regulations that would come into force in October for large non-bank financial companies after a series of collapses in this sector destroyed millions of depositors. The shadow of the Bank will experience similar rules as a state-owned and commercial lender, including having to meet more stringent liquidity requirements.

“To anticipate that we had to call,” Parekh told the financial period in an interview, adding that the agreement was “needed for both parties”.

The merger will soon expand the HDFC mortgage portfolio and allow it to sell more home loans because the company is seen utilizing the recovery after Indian Pandemic.

Parekh said the demand increased when the family was enhanced to a larger house after being reduced in locking, adding that HDFC had received 83,000 loan applications in March, far more than 65,000-70,000 monthly average.

The bank will also be able to borrow more, he said, because a number of Indian lenders have hit the ceiling in how much they can lend to HDFC. “Many lenders to us have reached their mandatory loan limit… The sources are drying,” he said.

As part of HDFC Bank, HDFC housing finance business can also benefit from lending access to cheaper capitals. This will enable the company to issue more loans at homes and large infrastructure projects, which had not yet been carried out by HDFC.

Analysts said the merger could trigger a series of agreements in the country’s banking sector, as a competitor to hunt acquisition to close the gap with HDFC Bank.

But they also warned that regulators could block the agreement because of concerns such as the integration of HDFC insurance subsidiary. The Group has 48 percent HDFC Life, life insurance business, but the HDFC Bank will become the majority shareholder or limit its ownership to less than 30 percent after the merger, Parekh said.

“We will take the steps needed,” he said. “So we might have to buy 2 percent of the market, if they allow us. I don’t think it’s a big problem.

However, the guarantee has not convinced all investors or analysts. HDFC Bank shares jumped 10 percent to RS1,722 ($ 22.56) after the merger was announced on April 4 but since it fell 15 percent to close at RS1,464 on Wednesday, the last day of the trade before the market was closed to the public. holiday.