A major reason for the long-awaited merger of HDFC and HDFC Bank was costs. In the Indian financial system, only banks can raise funds from the public through current accounts and savings accounts, on which they pay either no or very low interest. Such deposits accounted for 44% of HDFC Bank’s fund base in 2022-23. In contrast, non-bank financial companies (NBFCs) such as the erstwhile HDFC can only raise term deposits from the public, that too typically at higher interest rates than banks. Thus, the average cost of funds for HDFC was much higher than that for HDFC Bank.