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

By Saikat Das

HDFC Bank Ltd, India’s largest private sector lender, is in talks with several global banks to offload as much as 84 billion rupees ($1 billion) in loans to reduce its credit book and bring it more in line with deposits, according to people familiar with the matter.

Discussions are ongoing with banks including Barclays Plc, Citigroup Inc and JPMorgan Chase & Co, said the people, who asked not to be identified as the information is private. ICICI Bank Ltd is also involved in the talks, one of the people said.

The proposed loan portfolio sales, with terms yet to be finalized, would take place through a debt instrument known as pass through certificates, the people added.

JPMorgan declined to comment. HDFC, Barclays, Citi and ICICI didn’t reply to requests for comment.

Indian banks are under increased regulatory pressure 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 lender is also in separate discussions with local asset management companies to sell as much as 100 billion rupees of loans, Bloomberg News reported earlier. It already sold a 50 billion rupees loan portfolio to an undisclosed buyer in June.

HDFC’s credit to deposit ratio stood at 104 per cent at the end of March, higher than the 85 per cent to 88 per cent rate in the previous three fiscal years, according to ICRA Ltd, a unit of Moody’s Ratings. The ratio rose following HDFC Bank’s merger last year with mortgage lender Housing Development Finance Corp.

Its gross advances grew to 24.9 trillion rupees as of June 2024, a 52.6 per cent increase compared to the previous year, according to data from the bank.

Indian banks’ deposits grew 11 per cent annually through Aug 23, slower than loan growth of 14 per cent, according to the latest data from the Reserve Bank of India. The deposit growth has been lagging credit for some time, which “may potentially expose the system to structural liquidity issues,” RBI said in August.