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HDFC Bank receives Rs 30,000 crore prepayments amid signs of economic recovery, deleveraging

In clear signs of a robust economic recovery and sustained deleveraging by top-rated Indian corporates, HDFC Bank received about Rs 30,000 crore in prepayments through the June quarter, primarily from companies in the commodities and infrastructure sectors, two people familiar with the development told ET.

“HDFC Bank has not seen such a high level of prepayment in the recent past,” said one of the persons cited above. “Other banks also obtained prepayments, but the scale is not that high because of lower business volumes.”

HDFC Bank, India’s most valuable lender, did not reply to ET’s queries on the subject. Industry sources didn’t reveal the names of individual corporate borrowers prepaying their loans to HDFC Bank.

In the April-June quarter, AAA or AA-rated companies sought to deleverage as they recorded solid cash balances, banking sources said. Cash flows were robust at commodity companies because of record iron ore or aluminium prices, boosting net profits. Infrastructure companies, too, reported fatter bottom-lines due to the government’s extensive highway-building programme.

HDFC Bank now expects renewed credit demand from these companies in a quarter or two, with the pace of economic recovery quickening and fueling the need for more funds.

The bank expanded its corporate loans in excess of 10% in the April-June quarter to about Rs 3.15 lakh crore. Wholesale banking advances largely include working capital loans. About four years ago, the book size was about Rs 1 lakh crore at the traditionally retail-focused HDFC Bank.

“Prepayments came from borrowers with more than two years of residual loans outstanding,” said a market source.

If a borrowing company runs a loan for two years and gives a prepayment notice of up to 30 days, the bank does not charge any penalty.

“Three months later, these companies will come forward with fresh credit demand,” said a senior banking executive, who advises companies on loan deals and works closely with HDFC Bank. “Demand is coming back as the second wave triggered only localised lockdowns.”

HDFC Bank is increasingly leaning toward companies, with the franchise built around individual consumption pushing credit to deleveraged corporates after Covid-induced job losses and wage cuts raised the risk perception of retail borrowers.

“Corporate loans will likely grow selectively,” Kaizad Bharucha, Executive Director, HDFC Bank, said in an interaction with ET two weeks ago. “The second wave has not destroyed demand for corporate loans but postponed it. With caseloads falling, companies will require money – both working capital and term loans.”

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