Why HDFC Bank is taking over its parent

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Editor's note: This morning, India’s financial system was jolted with the announcement of a mega merger. HDFC Bank, the largest private bank, would be taking over its parent company, Housing Development Finance Corp. Ltd, the largest housing finance company in the country.  The duo announced a merger worth $40 billion, or around Rs 3 lakh crore—probably the biggest in Indian history—in which the parent company would cease to exist. The prospective merger of the two was one of the mostly loosely kept secrets of corporate India; the companies had notably discussed a merger six years earlier as well, and every now and then someone would speculate over whether and when they would combine. But the announcement today came with no warning or even rumours preceding it, sending down a googly in Indian corporate circles. Both stocks witnessed a surge in pre-open trading as soon as the announcement was made and closed the day up about 10%. Why now? The two companies have prodded the prospect of a merger several times before. But with interest rates at an all-time low and the regulatory …