HDFC Bank Ltd. is mulling the sale of a loans portfolio, according to people familiar with the matter, amid heightened regulatory scrutiny on the nation’s lenders as their credit growth surges.
India’s biggest private sector bank has approached public sector lenders, non-banking finance 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 Ltd. and 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’s expanding toward 8%, decision makers at banks are under pressure to address potential financial risks that are building. India’s central bank 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% in March, a decade high, according to RBI data. That has eased since, though remains elevated at 77.9% as of June 14.
Bank deposits in India grew 12.6% annually through June 14, compared with 19.2% loan growth, the latest RBI data show.
“The persisting gap between credit and deposit growth rates warrants a rethink by the boards of banks to re-strategize their business plans,” the Reserve Bank of India said in a monthly bulletin last month. “A prudent balance between assets and liabilities has to be maintained,” it said.
HDFC’s credit-deposit ratio rose as high as 110% after the merger, according to a report by ICRA Ratings, the local arm of Moody’s Investors Inc. It’s since dropped to 104% at the end of the last fiscal year, though remains above the average of between 85%-88% in fiscal 2021 through fiscal 2023.
The firm’s total loans expanded about 53% to 24.87 trillion rupees at the end of June, compared with a 24% expansion in deposits during the same period.
