HDFC Bank UT2

completed

The project consists of a 15-year subordinated debt of $100 million to HDFC Bank Ltd. (HDFC Bank or the Bank), India’s second largest private commercial bank with 2.2% market share in terms of total banking sector assets. The project will support the Bank in augmenting its capital base to meet the enhanced capital requirements as per Basel II norms, as well as increase its market share. This long-term funding will also help improve the Bank’s maturity mismatch position. HDFC Bank is a domestic AAA rated institution and has the strong backing of its parent - Housing Development Finance Corporation (HDFC) – a housing finance institution that IFC helped founded in 1978. HDFC Bank is listed on the Mumbai and National Stock Exchanges, as well as on the NY Stock exchange. It has built up a formidable brand name and franchise in a relatively short span of time and has outperformed most other banks, private sector or government-owned, by a significant margin. As of March 31, 2006, the Bank had total assets of $16.5 billion and net worth of $1.2 billion. Although HDFC Bank has been able to raise about $130 million equivalent Upper Tier II Capital (UT2) in the domestic bond market from April 1, 2006 till date, it has approached IFC for an additional investment as it is desirous of diversifying its funding sources and investor base.The proposed investment, which qualifies as Upper Tier II Capital, will be structured as per the guidelines recently issued by the Reserve Bank of India (RBI) permitting banks to raise subordinated debt in foreign currency from foreign investors. This is a window of opportunity for IFC to play a key role in introducing and encouraging new, innovative banking products in India, and in developing the subordinated debt market.