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India’s largest private lender HDFC Bank (NYSE:HDB) plans to sell $1.2 billion of loan portfolios using a rare debt instrument, as it seeks to cut exposure to certain sectors and address challenges in raising deposits, Bloomberg reported on Friday.
The bank is in talks with local asset managers including ICICI Prudential AMC, Nippon Life India Asset Management, and SBI Funds Management Pvt. to issue so-called pass-through certificates, a route that has not been used in a decade by the bank, the report said, citing people familiar with the matter.
The certificates, to be backed by a pool of the bank’s car loans, will likely be issued in multiple tranches in the next few weeks, and the securities are expected to offer an interest rate in the range of 8.3-8.5% to investors, according to the report.
HDFC Bank (HDB) is trying to cut its retail loan portfolio amid heightened regulatory pressure in the banking industry to improve credit-deposit ratios — a measure of how much of a bank’s deposits are being lent out.
The sale, if materialized, will help the lender improve its CD ratio which has worsened recently as credit growth outpaces deposit growth in the country, the report added.
Kotak Mahindra Asset Management Co. is also reportedly talking to the bank on possible subscription of those securities.
The move comes after India’s central bank warned banks of potential liquidity issues and called on them to attract more savings.
