HDFC in talks with global banks to offload $1 billion in loans

17 Sep 2024 CW Team

HDFC Bank Ltd., India's largest private sector lender, is in discussions with global banks to offload up to Rs 84 billion in loans. The move aims to reduce its credit portfolio and better align it with deposits, according to sources familiar with the matter. Among the banks involved in the ongoing talks are Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., and ICICI Bank Ltd.

The loan portfolio sales are expected to occur through a debt instrument known as pass-through certificates. Although the terms are yet to be finalised, this strategy is part of HDFC's efforts to improve its credit-to-deposit ratio, which has deteriorated in recent years due to credit growth outpacing deposits. JPMorgan declined to comment, while HDFC, Barclays, Citi, and ICICI have not responded to requests for comment.

HDFC Bank's credit-to-deposit ratio stood at 104% at the end of March, significantly higher than the 85% to 88% range in the previous three fiscal years. This increase followed the bank's merger with Housing Development Finance Corp. last year. HDFC's gross advances grew to ?24.9 trillion as of June 2024, marking a 52.6% increase compared to the previous year.

Indian banks are under regulatory pressure to improve their credit-to-deposit ratios, a key measure of lending activity relative to deposits. HDFC's move to sell its loan portfolio is a step toward addressing this issue. Indian banks' deposits grew by 11% annually through August 23, slower than the 14% growth in loans, according to the Reserve Bank of India. The RBI warned in August that this lag in deposit growth "may potentially expose the system to structural liquidity issues." (ET)

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