Mumbai: The merger of housing lender HDFC and private sector bank HDFC Bank has been approved by HDFC's board of directors, the firm said in a statement on Monday. According to the proposed agreement, HDFC Bank will be 100% owned by public shareholders, with existing HDFC Limited shareholders owning 41% of HDFC Bank.

According to the share exchange ratio, HDFC shareholders would receive 42 equity shares of the amalgamated business for every 25 equity shares held. On Monday, HDFC Bank and HDFC surged about 10% in value.

Terming the deal a “merger of equals” Deepak Parekh, Chairman of Housing Development Finance Corporation Limited, stated, this move would ensue larger balance sheet would enable the underwriting of large-ticket infrastructure loans, faster the speed of credit expansion in the economy, promote affordable housing, and raise the quantity of credit to priority sectors, including agriculture," he added.

HDFC Bank Chairman Atanu Chakraborty said, "The combined entity's product and market leadership in the housing finance business, combined with HDFC Bank's distribution and customer leadership, enables the combined entity to offer a full suite of financial products to Indians at large, and the proposed transaction is a big step toward realising our government's vision of housing for all." 

The merger is now subject to regulatory approval from the Reserve Bank of India (RBI), the Competition Commission of India, the Securities and Exchange Board of India (SEBI), and the National Housing Bank. By market capitalization, HDFC Bank is India's largest private sector bank.