HDFC Bank is in the final stages of assigning a Rs 12,372 crore car loan portfolio, its second such transaction in two months as the bank seeks to bring down its credit-deposit ratio (CD ratio).India Ratings & Research, a Fitch affiliate, has assigned AAA rating to India Universal Trust AL2 under which the loans have been securitised.HDFC Bank is the originator of the loans which were given before October 31 2024 with an average tenure of 17.5 months, with an original loan-to-value of 84%. The average balance in the loan pool is Rs 6.76 lakh and an internal rate of return of 8.91%. The loans will be continued to be serviced and collected by HDFC Bank through their respective tenures.This is the second time in two months that the bank has securitised its car loan book for instutitonal investors in an attempt to reduce its high credit to deposit ratio. In September the bank has made a similar seucritisation of Rs 9062 crore car loans which were also rated AAA by India Ratings.Asset-backed securities (ABSs) are financial securities backed by income-generating assets such as home loans, credit card receivables or car loans.ABSs are created when a originator pools the loans into an instrument which is then sold to investors. Mutual funds, credit funds and insurance companies could be buyers of such securitised loans which pays a steady stream of fixee interest, like bonds.These assets will be reflected as an off balance sheet item for the bank and help it to reduce its CD ratio which was at 100% at the end of September, higher than its 87% pre merger number but down from 110% after its patent HDFC was merged with it in July last year. A high CD ratio indicated that the bank's loan growth is outpacing its deposits at a time which is considered unhealthy for a bank.The ratings agency said HDFC Bank's origination and servicing capabilities are strong as reflected in its wide geographical presence and customer base. "For auto loans, the seller’s origination and underwriting practices primarily focus on the customer income profile, leverages and past repayment track records including detailed analysis of the repayment capabilities of underlying obligor and assessment of vehicle. All loan collections are through NACH mandate or standing instruction. It has an adequate telecalling infrastructure and field presence to facilitate the collections across the country," India Ratings said.The loans have been divided into three buckets, namely Series A1, Series A2 and Series A3 according to the maturities of the pooled loans, which is November 2026, November 2027 and November 2030. The loans also have a default guarantee of Rs 334 crore bundled in within structure in case some loans in the trust face a default.India Ratings has derived a base case gross default rate of 0.9%-1.1% after analysed loan pool for itd default rate, recovery rate, recovery timeline and prepayment rate.