HDFC Bank May Offload Rs 60,000-70,000 Crore Worth Loan Assets

The lender is likely to sell mortgage and car loans as part of this process, according to two people in the know. HDFC Bank will likely resort to passing through certificates for such sales, the people quoted above said.

This month, HDFC Bank is looking to sell over Rs 9,000 crore worth of car loans through the PTC route. This is the largest ever PTC sale the bank has undertaken till date. In a statement on Wednesday, rating agency India Ratings & Research said that it has assigned Universal Trust AL1 Provisional Rating to HDFC Bank's instruments.

The ratings are subject to HDFC Bank's repayment track record and the performance of the loans constituting the PTCs.

Such instruments will carry a coupon rate 40–50 basis points higher than the contracted rate of the underlying loans. This will likely give more reason for potential investors to buy these instruments without hurting the bank's cost of funds too much.

Mutual funds and insurance companies are likely to invest in these certificates, as they have patient capital. The bank's higher rating will also likely attract high-quality international investors, the people quoted above said.

Queries mailed to HDFC Bank on Friday were not responded to.

The sale of assets was identified as a potential solution to the bank's high credit-deposit ratio. As of June 30, HDFC Bank's credit-deposit ratio was at 105%, which indicates that loans outsize deposits on the lender's balance sheet. Despite efforts to mobilise deposits through branches, the outstanding credit-deposit ratio has been moving down slowly, the people quoted above said.

While efforts to raise deposits will continue, selling existing loan assets in the market will free up liquidity and also bring down the ratio, the people said.

HDFC Bank reported advances worth Rs 24.87 lakh crore and deposits worth Rs 23.8 lakh crore. This includes Rs 1.33 lakh crore worth of auto loans and Rs 7.88 lakh crore worth of mortgage loans.

In July 2023, the bank concluded its merger with Housing Development Finance Corporation Ltd, which boosted its loan book in favour of low-yielding mortgage loans. The merger also pushed up the credit-deposit ratio to above 100%.

Banks have the option of slowing down their loan growth sharply as a way to bring down the credit-deposit ratio. In the first quarter, HDFC Bank reported a marginal 0.8% contraction in outstanding loans, sequentially.

However, the lender has confirmed that this would not be the preferred method.

"...what has happened in quarter one is not a reflection of what we plan to do. This is a kind of adjustment that has happened. It's a matter of time that you would see in the next three quarters what we do," HDFC Bank CEO Sashidhar Jagdishan had told analysts after announcing June quarter results.