HDFC Bank in talks with global banks to sell $1 billion loans: report

Private sector lender HDFC Bank Ltd is in talks with some global banks to sell about $1 billion (₹8,400 crore) of loans to pare its credit book and align it with deposits, Bloomberg reported citing unidentified people familiar with the matter.

Barclays Plc, Citigroup Inc. and JPMorgan Chase and Co. are reportedly among the banks involved in the discussions, the reported said, citing the people mentioned above who declined to be identified as the information is private. Rival lender ICICI Bank Ltd is also reportedly involved in the talks.

Specific details of the sale have not yet been determined, but it would reportedly involve using “pass through certificates” (PTCs), or debt instruments that allow investors to receive payments from the underlying loans in the portfolio. Income generated by loans such as interest payments “passes through” to the holders of these certificates.

Lenders are facing mounting pressure from regulators, such as the Reserve Bank of India (RBI), to boost their credit-to-deposit ratios—a metric that indicates how much of their deposits are being used for lending.

HDFC Bank offloading some of its loans is expected to assist HDFC in improving this ratio, which has deteriorated in recent years as credit growth has surpassed deposit growth.

Lenders are under increasing pressure from regulators, including the Reserve Bank of India (RBI), to improve their credit to deposit ratios — a measure of how much of a bank’s deposits are being lent out to borrowers. The loan sales will help HDFC improve that ratio, which has worsened in recent years as growth in credit has outpaced deposits.

The private lender is also in separate talks with asset management companies to sell about ₹10,000 crore (about $1.19 billion) of loans, Bloomberg News had reported earlier. It already sold a ₹50 billion ($600 million) loan portfolio to an undisclosed buyer in June.

HDFC Bank’s credit to deposit ratio was 104% at the end of FY24, higher than the 85-88% rate in the previous three fiscal years, ICRA Ltd, a unit of Moody’s Ratings, said. The ratio had jumped after HDFC Bank’s merger last year with mortgage lender Housing Development Finance Corp.

Gross loans on the books, meanwhile, rose to ₹24.9 trillion as of June, a 52.6% jump when compared with a year ago.

Deposit growth has been lagging credit for some time, which “may potentially expose the system to structural liquidity issues,” the central bank said  last month.

Bank deposits rose 11% annually through 23 August, slower than loan growth of 14%, according to the latest data from the Reserve Bank of India.