Mumbai: HDFC Bank is looking to raise around ₹10,000-15,000 crore through infrastructure bonds. The bank is making market enquiries to issue these bonds, which are a good option for gathering long-term capital and meeting reserve needs following its merger with HDFC last year.
Why Infrastructure Bonds?
Infrastructure bonds are attractive for HDFC Bank because they offer flexibility in managing statutory liquidity ratio (SLR) and cash reserve ratio (CRR). These bonds, with a minimum maturity of 7 years, are not subject to SLR and CRR requirements. SLR is the percentage of deposits that banks must hold in liquid assets like government bonds, currently set at 18%. CRR is the portion of deposits that must be held with the RBI, currently at 4.5%.
Merger Impact and Financial Strategy
After merging with HDFC, HDFC Bank has to balance its growing deposit base with the lower-yielding home loans it inherited. The bank has seen a decline in its net interest margins, from 4% in FY23 to 3.44% in FY24, due to this new mix of assets and liabilities. Issuing infrastructure bonds helps the bank manage this balance without needing to set aside additional reserves.
Previous Bond Issues and Market Conditions
In March 2024, HDFC Bank issued infrastructure bonds worth ₹2,910 crore at a rate of 7.65%. The current bond market is stable after election-related volatility, making it a good time for the bank to issue new bonds.
Bank Credit and Deposit Growth
According to the latest RBI data, as of May 31, the growth in bank credit was at 16.1% year-on-year, while deposit growth was at 12.2%, excluding the impact of the HDFC merger.
Contact Information
HDFC Bank did not respond to requests for comment on this matter.
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