The sponsor, HDFC, an existing IFC client, is the single largest shareholder with 21.99% share of Bank’s equity. As of March 31, 2006, Foreign Institutional Investors held around 51.75% (19.27% overseas and 32.48% in India) of the capital. Nearly 12.25% is with non-corporate investors and the balance is held by financial institutions. The shares are listed on the Bombay Stock Exchange and the National Stock Exchange and American Depository Shares are listed on the New York Stock Exchange (NYSE).

IFC funding will be a subordinated loan of $100 million.

100.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	100.0
Equity

* These investment figures are indicative

HDFC Bank is headquartered in Mumbai and has 535 branches across the country.

The project is expected to have strong development impact by:

- Demonstration effect:

The investment will have a demonstration effect in introducing and encouraging new, innovative liability products such as UT2 and stimulating investor demand for the product.

- Strengthening the presence of the private sector banks in India:

The government-owned banks are still dominating the banking industry, and HDFC Bank and a few large private sector banks (such as ICICI Bank, Kotak Mahindra Bank and UTI Bank) are poised to take the lead position in the country’s banking industry. The project will support the consolidation and long-term growth strategy of HDFC Bank and improve its financial fundamentals by strengthening capital adequacy, diversifying funding sources and reducing maturity mismatch. It will facilitate this well-run private sector bank to overtake the state-owned banks, and set new a benchmark for the industry.

IFC has several important roles and contributions in this project:

Addressing the funding needs of a top performing bank – IFC has quickly responded to HDFC Bank’s request for funding, which will help increase the Bank’s capitalization ratio and enable it to implement a more dynamic growth strategy.

Provide long-term financing, diversify funding sources, reduce maturity mismatch - This would be the first IFC UT2 transaction in India. The IFC subordinated long term financing will diversify the Bank’s funding base and reduce the asset/liability maturity mismatch.

This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.

During appraisal, IFC will analyze the FI portfolio for types of transactions, size, tenor and industry sectors and determine the Applicable Requirements if any, based on an analysis of the potential Environmental and Social risks associated with the FI portfolio. The Applicable Requirements would include a combination of:

- the IFC FI Exclusion List(s) and/or;
- the applicable National Environmental and Social Laws and regulations, and/or
- the IFC Performance Standards.

IFC will also review, if required, the capacity of the FI to manage environmental and social risks and to establish and maintain the ESMS. IFC will suggest Supplemental Actions to address any gaps. Based on the review, the project will be required to:

- Develop an Environmental and Social Management System (ESMS), prior to disbursement that is satisfactory to IFC, to ensure that its investments/activities are in compliance with the Applicable Requirements,
- Identify responsible, qualified persons to manage and implement the ESMS,
- Commit to implement the ESMS and take action to remedy any gaps in ESMS implementation on an ongoing basis,
- Submit a periodic report to IFC as per a format to be provided by IFC.