Tag: hdfc bank

RBI partially lifts ban on HDFC Bank, allows it to sell new credit cards, BFSI News, ET BFSI

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Eight months after barring the country’s largest private sector lender HDFC Bank from selling new credit cards, the Reserve Bank of India (RBI) has lifted the ban.

However, the ban on launching new technology initiatives remains.

In December last year, the RBI had come out with an unprecedented action implementing both the bans, after repeated instances of technological outages at the lender, which is the market leader in the credit cards segment.

Rivals ICICI Bank and SBI Cards seized the opportunity to narrow the gap with HDFC Bank.

The bank’s existing users were not impacted by the ban and it had 1.48 crore credit card customers as of June.

The impact

On July 17, the bank’s Chief Executive and Managing Director Sashidhar Jagdishan had said it has complied with 85 per cent of the RBI’s requirements on the improvements desired, and the ball is now in the regulator’s court to re-allow the bank.

Earlier, its technology and credit card vertical had said the time off the market has been utilised to re-draw processes and the teams are raring to go.

Jagdishan had said a technology audit is also over and the RBI will now be “independently” taking a view on when to lift the penal actions taken against the bank.

“We have given a milestone to the regulator in terms of what are the things we are doing on technology, complying with their advisories and directives.

The progress

“We have covered a significant portion as we speak. Almost 85 per cent of what we had to do has been covered,” Jagdsihan, who has been with the lender for over two decades and worked as the ‘change agent’ in the years leading to his elevation, said.

He added that the ball is in the regulator’s court. “As they deem fit, as they see that we are on the right track, I am sure at some point of time, they will lift the embargo.”

Acknowledging that the bank has lost market share in the credit card segment due to the ban, Jagdsihan said tech outages are a global phenomenon but it is the time taken to recover from a setback where the bank erred, leading to the “rap on the knuckles” from the regulator.

The action against HDFC Bank has been followed with a ban on card companies Mastercard and American Express from selling any new cards because of a failure to adhere to data localisation rules.

Also read : HDFC Bank episode shows that digital banking is not easy



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RBI lifts ban on HDFC Bank issuing credit cards, BFSI News, ET BFSI

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The Reserve Bank of India (RBI) has lifted an eight month ban on HDFC Bank in a big relief to the private sector lender, a bank spokesperson confirmed. On December 3, in an unprecedented move the bank was barred from issuing new credit cards and launching any new digital products after multiple issues linked to digital banking, cards and payments on the bank’s platform in the last two years.

HDFC Bank, the largest issuer of credit cards in India lost market share in the last few months as restrictions on issuing new cards meant sales stopped. Outstanding credit cards dropped from 15.4 million in November 2020 to 14.9 million in May 2021.

However, in a call with the media at the end of June the bank’s senior management expressed confidence that they will make up for the lost time by cross selling to liability and other asset customers once the ban on issuing new cards is lifted.

Parag Rao, group head, payments, consumer finance, digital banking and IT at HDFC Bank said the bank is preparing to return to the market “with a bang” whenever RBI removes the ban. In the last seven months the bank has put an early warning system to manage large volumes, declogged processes and replaced old technology as part of its short and long term plan submitted to RBI, Rao said.



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New credit cards: RBI partially lifts curbs on HDFC Bank

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In a major relief for HDFC Bank, the Reserve Bank of India has partially lifted the ban on the private sector lender and has allowed it to issue new credit cards.

“The bank has received a letter from the RBI lifting the restriction on sourcing of new cards,” said a person briefed on the development.

The bank will have to submit a board-approved letter of commitment to continued compliance with IT requirements, the person said, adding that it is expected the lender will submit it shortly. The restriction on digital launches will continue as of now.

The Reserve Bank of India had in December last year directed HDFC Bank to temporarily halt sourcing of new credit card customers as well as launches of digital business generating activities planned under its proposed programme Digital 2.0.

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HDFC Bank approves issuance of debt instruments in the form of AT1 bonds from overseas markets

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HDFC Bank on Monday said it will issue debt instruments in the form of Additional Tier 1 bonds in international markets. “…we had informed the stock exchanges that the Board of Directors of HDFC Bank in its meeting held on July 17, 2021, is contemplating raising of long term funds through the issuance of Basel III compliant Additional Tier 1 Bonds (Notes), in the international markets, subject to market conditions,” it said in a stock exchange filing.

An offering memorandum has been prepared and shall be made available to the prospective investors in relation to the contemplated issue of Notes, it further said. The bank, however, did not specify the amount to be raised.

Ba3 (hyb) rating

Meanwhile, Moody’s Investors Service in a statement said it has assigned a Ba3 (hyb) rating to HDFC Bank’s proposed USD-denominated, undated, non-cumulative and subordinated AT1 capital securities. “The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” it said. In its meeting on July 17, the bank’s board had approved the issue of standalone foreign currency-denominated Perpetual Debt Instruments as Basel III-compliant AT1 bond for foreign (global) investors outside India, on an unsecured , public or a private placement basis, along with a proposed listing of the AT1 Bonds and other related activities in the course of the financial year 2021- 22, subject to market conditions and applicable approvals.

Also read: Is HDFC Ergo Optima Secure value for money?

Earlier, the State Bank of India had also raised capital by AT1 bonds in the overseas market. The capital raised through the AT1 bonds will help enhance the bank’s capital base. HDFC Bank’s total Capital Adequacy Ratio was at 19.1 per cent as on June 30, 2021 as against a regulatory requirement of 11.075 per cent.

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HDFC Bank’s AT1 bonds get Moody’s Ba3 rating, BFSI News, ET BFSI

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MUMBAI: HDFC Bank‘s proposed Additional Tier 1 (AT1) bonds have been rated Ba3, three notches below their deposit ratings by Moody’s, with limited likelihood of any rating upgrade in the next 12-18 months due to possible weakness in sovereign rating and the likelihood of rising bad assets in the Indian financial system.

The bank will be the first private sector lender to offer those quasi-equity securities offshore if it finally launches the overseas sale that is expected to open for subscription in the next 7 days.

HDFC Bank will likely set a benchmark for many other local lenders including Union Bank of India, State Bank of India and Axis Bank.

S&P is also expected to come out with a similar rating grade for HDFC Bank’s AT1 series.

The initial guidance is likely to be less than 4 per cent, although it could finally settle anything between 3.5 per cent and 4 per cent, said people familiar with the matter. The size of the issue is expected to be in the range of $500 million to $1 billion depending on investor demand, ET reported on July 29.

“Roadshows have just begun across the world,” one of the persons cited above said.

In between, there were hard negotiations for the pricing particularly after a Thai bank raised AT1 at about 4 per cent two weeks ago.

The borrower is actually looking for 3.5 per cent, which looks tough. Still, there will be good demand for any paper series, branded with the HDFC mark, dealers said.

HDFC Bank and individual investment bankers could not be contacted immediately for comments.

Nearly a dozen banks have been appointed to help the proposed bond sale. Those banks include Barclays, Bank of America, Citi, HSBC, JP Morgan, Standard Chartered, MUFG, Sofgen, BNP Paribas and Morgan Stanley.

AT1, also known as perpetual bonds, add to banks’ capital base unlike perpetual papers issued by any corporate. Such securities do not have any fixed maturity but generally have a five-year call option that allows an exit route for investors.

“The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” Moody’s said in a report Monday.

The principal and any accrued but unpaid distributions on these capital securities would be written down, partially or in full, if HDFC Bank’s common equity tier 1 (CET1) ratio is at or below 5.5 per cent any time prior to 1 October 2021, and 6.125 per cent from and including 1st October, 2021.

In such a scenario, the write-down may be temporary, and the amount could be reinstated subject to the Reserve Bank of India‘s (RBI) conditions, Moody’s said.

“A lowering of HDFC Bank’s BCA (Baseline Credit Assessment) will lead to a rating downgrade of the proposed AT1 securities,” Moody’s added.



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HDFC Bank plans to raise funds via AT-1 bonds from overseas market, BFSI News, ET BFSI

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NEW DELHI: HDFC Bank on Monday said the bank plans to raise capital by additional tier- I (AT1) bonds in the overseas market to fund its business growth.

The bank is expected to raise up to USD 1 billion from these dollar denominated bonds.

“We hereby inform you that the bank had approved the issuing of debt instruments in the form of the notes, subject to market conditions,” HDFC Bank said in a regulatory filing.

An offering memorandum (OM) has been prepared and shall be made available to the prospective investors in relation to the contemplated issue of notes, it said.

The notes will not be offered or sold in India under the applicable laws, including the Companies Act, 2013, as amended from time to time, it added.

Earlier in April, the bank had informed that it is planning to raise up Rs 50,000 crore during the next 12 months through issuing bonds.

“The bank proposes to raise funds by issuing perpetual debt instruments (part of additional tier-I capital), tier-II capital bonds and long-term bonds (financing of infrastructure and affordable housing) up to a total amount of Rs 50,000 crore over the period of the next 12 months through the private placement mode,” HDFC Bank had said.

Perpetual bonds carry no maturity date, so they may be treated as equity, not as debt.



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HDFC Bank approves issue of AT1 bonds

Banking & Finance

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HDFC Bank on Monday said it will issue debt instruments in the form of Additional Tier 1 bonds.

“We had informed the stock exchanges that the Board of Directors of HDFC Bank in its meeting held on July 17, 2021, is contemplating raising of long term funds through the issuance of $ Basel III Compliant Additional Tier 1 Bonds (Notes), in the international markets, subject to market conditions,” it said in its filing.

An offering memorandum has been prepared and shall be made available to the prospective investors in relation to the contemplated issue of Notes, it further said.

The bank, however, did not specify the amount to be raised.

10 top banks create secondary market for corporate loans

Meanwhile, Moody’s Investors Service in a statement said it has assigned a Ba3 (hyb) rating to HDFC Bank’s proposed USD-denominated, undated, non-cumulative and subordinated AT 1 capital securities.

“The Ba3 (hyb) rating is three notches below HDFC Bank’s baa3 Baseline Credit Assessment (BCA) and Adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability,” it said.

In its meeting on July 17, the bank’s board had approved the issue of standalone foreign currency denominated Perpetual Debt Instruments as Basel III compliant AT 1 bonds to foreign (global) investors outside India, on an unsecured basis, on a public or a private placement basis, along with a proposed listing of the AT1 Bonds and other related activities in the course of the financial year 2021- 22, subject to market conditions and applicable approvals.

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HDFC Bank to double coverage of villages to 2L, BFSI News, ET BFSI

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Mumbai: HDFC Bank will double the number of villages it serves from 1 lakh to 2 lakh in the next couple of years by extending the footprint of its branches and through alternate channels. This is part of the bank’s strategy to increase the share of small businesses and rural, which are the fastest-growing segments for it.

HDFC Bank group head (CRB) Rahul Shukla said,“Priority sector lending is not a sideshow but becomes the main show as banks grow larger. The commercial and rural banking (CRB) business is driving this, The bank’s rural business grew 19% year-on-year in the first quarter despite the lockdown At present, we serve 1 lakh villages, covering both the wealthy as well as small and marginal farmers. We plan to increase that to 2 lakh in the next couple of years,” . He added that this would be achieved without a corresponding doubling of resources.

The bank is extending the footprint of its 5,500 odd branches by using alternate channels like the government’s common services centres (CSCs), which provide digital services to rural areas. The bank extends overdraft to leads generated by the CSCs based on their six months’ bank statement. It has also signed up 1.7 lakh village-level entrepreneurs (VLEs), of which 1.1 lakh have been onboarded as business facilitators.

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HDFC Bank to double rural coverage to 2L villages, BFSI News, ET BFSI

Banking & Finance

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Mumbai: HDFC Bank will double the number of villages it serves from 1 lakh to 2 lakh in the next couple of years by extending the footprint of its branches and through alternate channels. This is part of the bank’s strategy to increase the share of small businesses and rural, which are the fastest-growing segments for it.

“Priority sector lending is not a sideshow but becomes the main show as banks grow larger. The commercial and rural banking (CRB) business is driving this,” said HDFC Bank group head (CRB) Rahul Shukla. The bank’s rural business grew 19% year-on-year in the first quarter despite the lockdown.

“At present, we serve 1 lakh villages, covering both the wealthy as well as small and marginal farmers. We plan to increase that to 2 lakh in the next couple of years,” said Shukla. He added that this would be achieved without a corresponding doubling of resources.

The bank is extending the footprint of its 5,500 odd branches by using alternate channels like the government’s common services centres (CSCs), which provide digital services to rural areas. The bank extends overdraft to leads generated by the CSCs based on their six months’ bank statement. It has also signed up 1.7 lakh village-level entrepreneurs (VLEs), of which 1.1 lakh have been onboarded as business facilitators.

These VLEs have been empowered to issue sanction letters for consumer loans based on customer eligibility. Besides this, rural customers can access loans through the self-service digital portal as well.Extending the rural reach is part of HDFC Bank’s strategy of growing loans to small businesses. “India always had this entrepreneurial class. What has changed is that there is a lot more data available. Besides bureau data, there is bank transaction data and many small businesses are becoming part of corporate supply chains,” said Shukla.

According to Shukla, the opportunity is not in lending to 1.5-2 crore entrepreneurs who are already borrowing from banks, but the remaining 4.5 crore who are not yet part of formal credit. Tapping this segment is not possible without reaching out to semi-urban and rural India he said.



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Large private banks undercut smaller ones in corporate loans, BFSI News, ET BFSI

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The battle among banks for corporate loans pie is getting fierce even as corporates look at bond markets for cheaper fundraising to refinance existing high-cost loans.

Large private banks are offering aggressively priced refinance loans to lower-rated corporate borrowers of smaller banks.

The rates offered are almost 200 basis points lower than the market rate, which smaller banks are unable to match, according to reports.

With the Reserve Bank of India maintaining an accommodative stance, there is abundant liquidity in the market and rates are at rock bottom. Corporates whose loans are up for refinance are looking to take advantage of the opportunity to cut their interest costs.

PSU banks

PSU banks took are taking a hit.

The domestic corporate loans by the State Bank of India fell 2.23 per cent to Rs 7,90,494 crore in the quarter ended June 30, 2021, compared to Rs 8,09,322 crore in the same quarter last year. In the first quarter of FY21, SBI reported 3.41 per cent growth in corporate advances.

Union Bank of India‘s share of industry exposure in domestic advances dropped to 38.12 per cent at Rs 2,40,237 crore from 39.4 per cent at Rs 2,47,986 crore in the same quarter a year ago. Corporate loans dropped 3% at Indian Bank during the last quarter. At PNB, corporate loans fell 0.57 per cent at Rs 3,264,66 crore in June quarter 2021 compared to Rs 3,28,350 crore a year ago. However, HDFC Bank expanded its corporate loans over 10% in the April-June quarter to about Rs 3.15 lakh crore.

Up to May, the gross loans to large industries declined by 1.7 per cent year­-on­year, according to RBI data.

Ceding ground to private-sector rivals

The market share of public sector banks in loans declined to around 59 per cent (of all scheduled commercial banks’ outstanding credit) in December 2020 against around 65 per cent in December 2017.

However, during this period, PvSBs market share rose to around 36 per cent from around 30 per cent, going by Reserve Bank of India data.



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