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RBI may allow HDFC to carry forward pre-merger bonds

April 03, 2023

RBI may allow HDFC to carry forward pre-merger bonds
India’s largest mortgager, HDFC Limited, has started work on yet another round of massive bond sale.

Highly placed sources tell businessline that the housing financier may raise up to ₹50,000 crore by way of bonds in what could be the last tranche of bond issuance ahead of the merger. The issue is likely to conclude by May and with this, the lender would have concluded ₹1.32-lakh crore of bond issuances ahead of the merger.

In February, it had raised ₹25,000 crore of 10-year bonds and on March 27, the boards approved ₹57,000 crore of bond issuance.

The purposes of raising such heavy liabilities is to ensure that HDFC Limited is merger ready, which is expected to happen in July. Highly placed sources say the mortgager may be permitted to carry forward the bond raised prior to the merger.

This would take care of a reasonable proportion of asset liability management (ALM) when the books of HDFC Limited is merged with the bank’s financials. If the Reserve Bank of India allows grandfathering of these bonds, it would substantially ease the pressure on HDFC Bank to raise deposit. Also, in case the bank doesn’t get any leeway on the requirement of maintaining cash reserve ratio and statutory liquidity ratio, grandfathering of these bonds be handy in handling the ALM.

“Right now, the bank is approaching the merger with the assumption that there would be no dispensation from the regulator on the reserve ratios,” said a person aware of the matter. HDFC Limited did not respond to a mail seeking clarification.

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