IFC to invest $100 mln for HDFC Bank's Upper Tier II capital

New Delhi, Oct 12 (UNI) International Finance Corporation (IFC), the private sector arm of the World Bank Group, today announced its decision to invest 100 million dollars in Upper Tier II subordinate bonds, with a final maturity of 15 years to be issued by HDFC Bank.

''The infusion of debt will improve the capital adequacy of the bank,'' HDFC MD Aditya Puri told reporters here.

The event was organised by IFC and the conference was addressed by IFC Executive Vice-President Lars Thunnel.

Mr Puri said capital adequcy is composed of Tier 1 capital, Tier II capital and hybrid capital instruments. He said his bank will take recourse to all these instruments to improve its capital adequacy requirement, which have a statutory limit of nine per cent, adding most Indian banks, including HDFC Bank, were Basel II compliants.

''The investment will help HDFC bank augment its capital base primarily to support its growing asset business and will also increase the bank's long term resources,'' Mr Puri said.

Mr Thunnel, who is on a visit to India, said funding of Upper Tier II capital was an innovative instrument and HDFC Bank was the first Indian bank to be funded in this manner by way of a loan in foreign currency.

''IFC's quick response to RBI's Upper Tier II guidelines helps strengthen the long term growth strategy of HDFC Bank, and help it further improve its financial fundamentals by strenthening its capital adequacy and diversifying its funding sources. It will help the bank set a new benchmark for raising Upper Tier II capital in the Indian banking industry,'' Mr Puri said.

Mr Thunnell said the bonds will qualify as Upper Tier II capital as per RBI guidelines. Till date, only a few private sector banks have successfully issued UT2 capital due to complexity and the long-term nature of these products.

HDFC Bank is a domestic 'AAA' rated institution promoted by Housing Development Finance Corporation, a housing finance institution that IFC helped found in 1977.

HDFC Bank is listed on the Mumbai and National Stock Exchnages and the New York Stock Exchange.

IFC is the largest multilateral provider of financing for private enterprise in developing countries.

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