HDFC Bank Ltd., India’s largest private sector lender, is in discussions to sell up to Rs 8,400 crore ($1 billion) in loans to several global banks as part of its strategy to reduce its credit book and align it with deposits, according to sources familiar with the matter. The bank is engaging with global financial institutions such as Barclays Plc, Citigroup Inc., and JPMorgan Chase & Co., alongside domestic player ICICI Bank Ltd., the sources said.
The loan sales are expected to be facilitated through pass-through certificates (PTCs), a type of debt instrument commonly used in securitization deals. The terms of the sales are still being finalized, with the goal of improving HDFC’s credit-to-deposit ratio, a key regulatory measure. Indian regulators have increased pressure on banks to maintain a balanced credit-to-deposit ratio, which reflects how much of a bank’s deposits are being used for loans.
HDFC Bank’s credit-to-deposit ratio stood at 104% as of March 2024, a significant increase from the 85-88% range in previous years, according to ICRA Ltd., a unit of Moody’s Ratings. This surge followed the bank’s merger with Housing Development Finance Corp., which contributed to the growth of its gross advances to Rs 24.9 lakh crore as of June 2024, marking a 52.6% year-on-year increase.
The loan portfolio sales come as HDFC Bank navigates an environment where deposit growth has not kept pace with loan demand. According to the Reserve Bank of India (RBI), as of August 2023, Indian banks’ deposits grew at an annual rate of 11%, lagging behind loan growth, which expanded by 14%. The RBI has warned that this disparity could lead to structural liquidity challenges for the banking system if left unchecked.
In addition to its talks with global banks, HDFC Bank is also in separate negotiations with local asset management companies to sell up to Rs 10,000 crore worth of loans. Bloomberg News previously reported that the bank had already offloaded a Rs 5,000 crore loan portfolio to an undisclosed buyer in June 2024.
This latest move reflects HDFC Bank’s efforts to stabilize its credit book and maintain liquidity amid rising regulatory scrutiny and the broader challenges facing the Indian banking sector.
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