Mumbai: HDFC Bank is set to decide on raising as much as Rs 50,000 crores in the country’s biggest bond sale ever by a lender as it prepares to meet the higher reserve requirements ahead of the proposed merger of parent HDFC with itself.
The estimated requirement was more than Rs 80,000 crores and the bank has some excess bonds in its portfolio. In an exchange filing, the bank notified that it would deliberate the proposal in its upcoming board meeting on April 16.
“We wish to inform you that the bank proposes to raise funds by issuing perpetual debt instruments, tier II capital bonds and long-term bonds for financing of infrastructure and affordable housing up to a total amount of Rs. 50,000 crores over the period of next twelve months through private placement mode,” HDFC Bank notified.
“The board of directors would consider this proposal at its board meeting on April 16, 2022.”
HDFC corporation announced its merger with HDFC Bank, which will make it a financial behemoth with assets of over Rs 26 lakh crore. The move ends 20 years of speculation about a merger with regulatory tightening over the years having nullified HDFC’s advantage of remaining a non-banking finance company (NBFC).
In the run up to the proposed merger which may take up to 2 years to fructify, the merged entity may need to buy bonds worth Rs 80,000-90,000 crore over the next 18 months to gain regulatory approvals, in a bid to qualify to the regulator’s CRR & SLR norms.
SLR or statutory liquidity ratio is the proportion of deposits that a bank has to hold in government bonds and is currently at 18% of net demand and time liabilities (NDTL).
CRR or cash reserve ratio is the percentage of deposits banks have to keep with the Reserve Bank of India RBI and is at 4%.
“We have Rs 80,000 crore of excess liquidity cushion,” said HDFC Bank managing director Sashidhar Jagdishan on the day of the merger announcement. “We also plan to ramp up our deposit collection drive, in the run-up to the merger, so I am not worried about these requirements.”
Despite the overdrive to meet the liquidity norms, the managements have sought two-three years to meet SLR and CRR norms for all new loans.
“The bank has requested a phased-in approach in respect of SLR and CRR, priority sector lending as well as grandfathering of certain assets and liabilities and in respect of some of its subsidiaries,” Deepak Parekh, chairman, HDFC had said.
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