Finshots Daily Why is HDFC Bank selling its loan portfolios?
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Nov 30, 2024 Discover how banks package loans to sell them to investors. Learn about HDFC Bank's strategic move to sell its loan portfolios amidst declining growth rates. Explore the impact of its merger with HDFC Ltd. on the bank's balance sheet. Delve into the bank's efforts to enhance liquidity while navigating financial challenges and managing associated risks.
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HDFC Bank's Loan Growth Drop
- HDFC Bank's loan growth dropped significantly due to its merger with HDFC Ltd.
- This merger increased the bank's reliance on borrowings, raising its cost of funds and credit-to-deposit ratio.
Loan Securitization Strategy
- HDFC Bank is using loan securitization to manage its credit-to-deposit ratio.
- This involves selling bundles of loans to investors, freeing up cash and improving liquidity.
Securitization's Long-Term Impact
- Loan securitization offers short-term benefits but can impact long-term profitability.
- Selling loans means giving up future interest income, requiring the bank to find new income sources.