HDFC Bank mulling loan portfolio sale amid growth scrutiny: Report

By Saikat Das and Preeti Singh

HDFC Bank is considering the sale of some of its loan portfolio, according to people familiar with the matter, amid heightened regulatory scrutiny on the country’s lenders as their credit growth surges.
 

India’s biggest private sector bank has approached public-sector lenders, non-banking financial companies as well as some insurance companies and asset managers about participating in the sale, said the people, who requested anonymity discussing private conversations.
 

A measure of how much of a bank’s deposits are being lent out as loans — known as the credit-deposit ratio — has drawn scrutiny from the Reserve Bank of India as that gauge for the nation’s industry stands at a decade high. Selling some of its loan portfolio would go some ways to help HDFC bring that down following an increase in the wake of its 2023 merger with the bank’s parent HDFC. It may also aid its liquidity.
 

 

The move is an unusual one for HDFC Bank, which is approaching the market with such a sale for the first time since the two firms combined, the people said.
 

A spokesperson for Mumbai-based HDFC Bank didn’t reply to an email request for comment.
 

Shares of the bank fell the most in a month on Friday after it reported flat sequential deposit performance in the quarter ended June.
 

With loans growing significantly faster than deposits in India, where the economy is growing at about 8 per cent, decision makers at banks are under pressure to address potential financial risks that are building. The RBI has also asked banks to raise buffers for some consumer loans as it tries to keep a cap on evolving risks. 
 

The banking industry’s credit-deposit ratio stood at 80.3 per cent in March, a decadal high, according to RBI data. That has eased since but remains elevated at 77.9 per cent as on June 14.
 

Bank deposits in India grew 12.6 per cent annually through June 14, compared with 19.2 per cent loan growth, the latest RBI data shows.
 

“The persisting gap between credit and deposit growth rates warrants a rethink by the boards of banks to re-strategise their business plans,” the RBI said in a monthly bulletin last month. bloomberg

“A prudent balance between assets and liabilities has to be maintained,” it said.
 

HDFC’s credit-deposit ratio rose as high as 110 per cent after the merger, according to a report by ICRA Ratings, the local arm of Moody’s Investors. It has since dropped to 104 per cent at the end of the last financial year, though it remains above the average of between 85 and 88 per cent in 2020-21 through 2022-23.
 

The firm’s total loans expanded about 53 per cent to Rs 24.87 trillion at the end of June, compared with a 24 per cent expansion in deposits during the same period.
 

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