📷 Image Credits: The Economic Times
As India’s financial landscape undergoes significant shifts, HDFC Bank, one of the country’s leading private sector banks, is reportedly contemplating the sale of a portion of its loan portfolio. This strategic move comes in the wake of heightened regulatory scrutiny surrounding the surging credit growth in India’s banking sector. The bank’s decision to explore this option is aimed at addressing concerns related to its elevated credit-deposit ratio following its merger with HDFC Ltd.
According to a report by Bloomberg, HDFC Bank has initiated discussions with various entities including public sector lenders, non-banking finance companies, insurance firms, and asset managers to gauge their interest in potential loan portfolio acquisitions. While Business Today could not independently verify this information, the Reserve Bank of India is closely monitoring the credit-deposit ratio in light of the current industry trends.
The credit-deposit ratio, a crucial metric that reveals the proportion of a bank’s deposits being utilized for lending activities, has reached a decade-high for the industry. This surge in credit growth has prompted a closer examination of banks’ lending practices and liquidity management by regulatory authorities.
Following the merger with HDFC Ltd., HDFC Bank has witnessed a notable imbalance between its loan growth and deposit growth, raising concerns about liquidity management. The bank recently reported flat sequential deposit growth for the quarter ending in June, leading to a significant drop in its stock value.
In response to the recent developments, Nomura India noted that HDFC Bank’s loan and deposit growth rates for the quarter fell below their estimates for FY25. The bank’s stock experienced a 4.19% decline in value post the Q1 update, signaling potential concerns among investors.
These strategic considerations by HDFC Bank underscore the evolving dynamics of India’s banking sector, reflecting the ongoing efforts to adapt to changing market conditions and regulatory expectations. As the bank weighs its options regarding the potential sale of its loan portfolio, the industry continues to witness notable developments shaping the future of banking in India.