Housing Finance Development Corp. Ltd. plans to ask the Reserve Bank of India to permit its subsidiary HDFC Credila Financial Services to keep onboarding new clients until it finds a buyer. In accordance with the criteria set forth by the central bank for its merger with HDFC Bank, HDFC will have to reduce its ownership of HDFC Credila Financial Services by 10% over the course of the next two years and cease adding new clients. Currently, HDFC owns all of the company’s education finance divisions.

Views of Two Officials on the Matter

Since HDFC Bank already owns HDB Financial, the RBI does not want the bank to possess two NBFCs. Therefore, we expected RBI to instruct HDFC to sell its investment in Credila, one of the two officials said, adding that it was surprising for RBI to instruct HDFC to cease all new transactions.

Over the past year, the key player in home finance has attempted to sell a portion of its ownership in Credila. Large private equity investors and sovereign funds had expressed interest, but it had put off talks with them as it awaited RBI’s clarification on the merger, the second official continued. “This move could potentially cause a lot of worry for students. We will therefore seek clarity from RBI on whether they mean stopping onboarding new students after the effective date of the merger, or after two years by which time the sale has to be completed,” he added.

At the conclusion of the March quarter, Credila, one of India’s top companies in the education financing sector, had a loan book of 15,238 cr.

Compared to a net profit of 206 cr in FY2022, the company reported a net profit of 276 cr in FY23. Gross non-performing assets decreased from 0.24% in the prior quarter to 0.17% as of March 31.

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