According to persons familiar with the situation, HDFC Bank Ltd., India's largest private sector lender, is in discussions with multiple foreign banks to sell loans worth up to Rs 8,400 crore ($1 billion) in order to lower its credit book and bring it closer to deposits.
Discussions are underway with banks such as Barclays Plc, Citigroup Inc., and JPMorgan Chase & Co., according to the sources, who requested not to be identified because the material is confidential. ICICI Bank Ltd. is also participating in the negotiations, according to one of the sources.
The potential loan portfolio sales, whose terms have yet to be finalized, would take place via a debt instrument known as pass through certificates, according to the individuals. JPMorgan declined to comment. HDFC, Barclays, Citigroup, and ICICI did not respond to queries for comment.
Indian banks face significant regulatory pressure to raise their credit-to-deposit ratios, which assess how much of a bank's deposits are given to borrowers. The loan sales would help HDFC improve that ratio, which has deteriorated in recent years as credit growth has outpaced deposits.
Bloomberg News has reported that the lender is reportedly in separate talks with local asset management businesses about selling debts worth up to Rs 10,000 crore. It has sold a credit portfolio of Rs 5,000 crore to an unnamed bidder in June.
HDFC's credit-to-deposit ratio was 104% at the end of March, higher than the 85–88 percent rate seen in the preceding three fiscal years, as reported by Moody's Ratings subsidiary ICRA Ltd. After HDFC Bank and housing development finance corp., a mortgage lender, merged last year, the ratio increased.
According to figures from the bank, as of June 2024, its gross advances had increased to Rs 24.9 trillion, a 52.6% rise from the previous year.
As of August 23, deposits in Indian banks increased by 11% yearly, which was less than the 14% rise in loans, according to the Reserve Bank of India's most recent figures. For a while now, the growth of deposits has lagged behind that of credit, which the RBI stated in August "may potentially expose the system to structural liquidity issues."
