Loan Securitisation - Business Outrank

HDFC Bank, India’s biggest private sector lender in terms of assets, is expected to increase its loan securitisation business in the next few years to address rising investors’ needs. The bank’s Chief Financial Officer Srinivasan Vaidyanathan said this will unblock space for new loans without overburdening the balance sheet. It has already happened that HDFC Bank has been selling loans worth 463 billion rupees ($5.30 billion) this financial year. The securitization market in India is expected to grow by 25% this year to 2.4 trillion rupees, according to ICRA, a rating agency. After its merger with parent HDFC in July 2023, HDFC Bank has been working on decreasing its LDR or loan-to-deposit ratio which is currently almost 100 per cent. It wants to reduce it to below 90 per cent to enhance liquidity. However, the main reason for this approach is the further development of the loan securitization market in India. He pointed out that there is an increase in the interest of local investors, pension funds, insurance companies and even international players. Beside securitisation, HDFC Bank is also focusing on deposit growth especially in the retail deposits to enhance liquidity. The bank intends to grow its deposits at a rate which is higher than that of the banking system while keeping loan expansion in sync with the market. Better CASA (Current Account/ Savings Account) mix is still important as customers prefer equity investments over fixed deposits. Previously, HDFC Bank had reduced the growth of unsecured retail loans because of delinquency risks, but now it is seeing chances as its competitors step back. The relaxed regulations and the government’s efforts to lighten the tax burden on consumers are most likely to positively influence lending and deposit rates in the coming year.

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