“HDFC Bank has not experienced such a high level of prepayment in the recent past,” said one of the people named above. “Other banks have also obtained prepayments, but the scale is not that high due to the drop in business volumes. ”
HDFC Bank, India’s most valuable lender, did not respond to ET’s questions on the matter. Industry sources did not disclose the names of individual borrowers who prepaid their loans to HDFC Bank.
During the April to June quarter, companies rated AAA or AA sought to deleverage as they had strong cash balances, banking sources said. Cash flow was strong in the commodities companies due to record prices for iron ore or aluminum, which boosted bottom lines. Infrastructure companies also reported higher results due to the government’s extensive highway construction program.
HDFC Bank now expects credit demand from these companies to pick up in a quarter or two, as the pace of the economic recovery picks up and fueling the need for additional funds.
The bank extended its business loans by over 10% in the April-June quarter to around Rs 3.15 lakh crore. Wholesale bank advances largely consist of working capital loans. About four years ago the book size was around Rs 1 lakh crore at the traditionally retail oriented HDFC bank.
“Prepayments were from borrowers with more than two years of residual loans outstanding,” a market source said.
If a borrowing company gives a loan for two years and gives up to 30 days’ notice of repayment, the bank does not charge any penalties.
“Three months later, these companies will reapply for credit,” said a senior executive at the bank, which advises companies on loan deals and works closely with HDFC Bank. “Demand is coming back because the second wave only triggered localized blockages.”
HDFC Bank is increasingly leaning towards business, with the franchise built around individual consumption pushing credit to deleveraged businesses after Covid-induced job losses and wage cuts increased borrowers’ perceptions of risk. detail.
“Business loans are likely to increase selectively,” Kaizad Bharucha, executive director of HDFC Bank, said in an interaction with ET two weeks ago. “The second wave did not destroy the demand for business loans but postponed it. As the number of cases declines, businesses will need cash – both working capital and term loans. ”