Informist, Thursday, Sep 19, 2024

MUMBAI – The largest private sector lender, HDFC Bank Ltd, is planning to sell its pool of 90.63-bln-rupee car loan portfolio through an asset-backed securities transaction.

On Wednesday, India Ratings gave an ‘IND AAA/Stable’ rating to the pool of new car loans to be assigned to the trust originated by HDFC Bank.

HDFC Bank's gross advances stood at 24.87 trln rupees as of June-end, with auto loan assets under management at 1.33 trln rupees.

As per media reports, the private sector bank was considering the sale of some of its loan portfolio amid heightened regulatory scrutiny due to higher credit-deposit ratio.

HDFC Bank’s credit deposit ratio was at 104% as of March 2024, higher than 85-88% in the previous three financial years. The ratio increased after the merger of parent company Housing Development Finance Corp Ltd with the bank.

In the past few months, top Reserve Bank of India officials on several occasions have flagged the significant liquidity risks that India's banking sector could face owing to the widening credit-deposit gap, which is driven by households shifting their savings to other higher-yielding financial assets.

At the announcement of the latest Monetary Policy Committee meeting's outcome on Aug 8, RBI Governor Shaktikanta Das had emphasised the need for banks to focus on mobilising household financial savings through innovative products and services.

As per the release from the rating agency, the proposed transaction has a par structure, wherein the loan pool will be assigned to the pass-through certificates for a purchase consideration equal to 100% of the pool principal outstanding, with the Series A1 PTCs being 38.62%, Series A2 PTCs being 19.86%, and Series A3 PTCs being 41.52% of the principal outstanding.

According to the details provided by the bank to the rating agency, the collateral pool to be assigned to the trust at par had an aggregate outstanding principal balance of 90.62 bln rupees as on the pool cut-off date of Aug 31.

As on the pool cut-off date, the 108,711-loan pool had a weighted average seasoning of 15.2 months and weighted average amortisation of 20.8%, implying a significant repayment track record of underlying borrowers.

The weighted average original loan-to-value of the loans in the pool was 84.7%. The pool had an average original loan balance of 1.06 mln rupees and a weighted average internal rate of return of 8.92%.

At 0926 IST, shares of HDFC Bank were 1.1% higher at 1,713.60 rupees on the National Stock Exchange. End

Reported by Richard Fargose

Edited by Tanima Banerjee

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