HDFC Bank Receives Rs 30 Billion Upfront Amid Signs Of Economic Recovery And Liberation

As clear signs of a strong economic recovery and continued deleveraging by large Indian corporations, HDFC Bank received around Rs 30 billion in upfront payments in the June quarter, mostly from companies in the extractive and infrastructure sectors, they said.

“HDFC Bank has not seen such high prepayments in the recent past,” said one of the people quoted above. “Other banks have also received early payments, but the volume is not that high due to the lower volume of business.”
HDFC Bank, India’s Most Valuable Lender, did not respond to ET’s inquiries about this. Industry sources did not disclose the names of individual corporate borrowers who prepaid their loans to HDFC Bank.
In the April-June quarter, AAA or AA-rated companies sought deleveraging as they had strong cash holdings, bank sources said. broader results due to the extensive state highway construction program.
HDFC Bank now expects credit demand from these companies to return in a quarter or two as the pace of economic recovery accelerates and the need for additional funds increases.

The bank increased its corporate credit in the April-June quarter by more than 10% to around 3.15 lakh crore. The bank loans in wholesale business mainly include working capital loans. HDFC Bank focused on retail.
“Prepayments come from borrowers with more than two years of outstanding credit,” a market source said. If a borrowing company takes out a loan for two years and specifies a prepayment period of up to 30 days, the bank does not charge a contractual penalty.
“Three months later, these companies will have a new loan demand,” said a senior bank employee who advises companies on loan agreements and works closely with HDFC Bank. “Demand is returning because the second wave only caused local blockages.”

HDFC Bank is leaning more and more towards companies, with the franchise based on individual consumption increasing lending to non-debt companies after job losses and Covid-induced salary cuts and increasing the risk perception of private borrowers.

“Corporate lending is likely to grow selectively,” said Kaizad Bharucha, CEO of HDFC Bank, in an interaction with ET two weeks ago. “The second wave did not destroy, but shifted, the demand for corporate credit. As cases fall, businesses will need money for both working capital and fixed-term loans.”

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