Bank of Bar­oda home loans

Banking Frontiers - - Highlights - Me­hul@bank­ingfron­tiers.com

Home loans record the high­est CAGR in the last 5 years

Home loans have been the high­est con­trib­u­tor in the growth of bank credit in 2016-17. The to­tal amount of home loans ex­tended by banks stood at `8.6 tril­lion in the fi­nan­cial year, record­ing 15% higher dis­bur­sals. It is home loans that have recorded the high­est com­pounded an­nual growth rate (CAGR) in the last 5 years. They now con­sti­tute 12% of all bank credit and they have reg­is­tered CAGR of over 16%. The share of hous­ing in the bank credit was only 9.26% on March 2012 and it has been ris­ing over the years. Ev­ery bank’s fo­cus has been on re­tail.

The to­tal gross do­mes­tic ad­vances of Bank of Bar­oda in­creased to `3066 bil­lion in the last fi­nan­cial year, record­ing a yoy growth of 7.2%. Re­tail busi­ness reg­is­tered 19.50% share in the gross do­mes­tic ad­vances.

HOUS­ING LOANS

Hous­ing loans of the bank recorded 20.83% yoy growth in FY 2016-17. Ac­cord­ing to Mayank Me­hta, ED of the bank, the share of hous­ing loan seg­ment is the high­est at 59.16% of the bank’s re­tail loan port­fo­lio. Other mort­gage loans, auto loans, ed­u­ca­tion loans and per­sonal loans col­lec­tively con­sti­tute the re­main­ing around 40% of re­tail port­fo­lio of the bank. Home loans reg­is­tered yoy growth of 31.4% for pri­or­ity sec­tor and 9.91% for non-pri­or­ity sec­tor.

Says Me­hta: “The share of home loans in to­tal re­tail loans of the bank has recorded con­sis­tent rise in the last 5 years. It kept ris­ing ev­ery year, from 42.17% in 2012-13 to 42.50% to 42.95% to 49.10% and fi­nally to 59.16% as of March 2017.”

AG­GRES­SIVE SELL­ING

The op­er­at­ing units of the bank are putting all out ef­forts for can­vass­ing re­tail loans on an on­go­ing ba­sis. The bank had launched ex­ten­sive lead gen­er­a­tion cam­paigns us­ing both dig­i­tal and so­cial me­dia to gen­er­ate home loan leads, which can be con­verted to sanc­tions/dis­burse­ments. Dur­ing the last fi­nan­cial year, de­mon­e­ti­za­tion had af­fected the re­tail lend­ing busi­ness to some ex­tent. How­ever, size­able growth in re­tail loans was ob­served in the last quar­ter of the last FY. Ex­plains Me­hta: “Sub­stan­tial growth of re­tail loan port­fo­lio dur­ing Q4 in FY 2016-17 may be at­trib­uted to strate­gic shift and fo­cused ap­proach adopted by the bank to­wards ag­gres­sive sell­ing strat­egy by way of in­tro­duc­tion of spe­cial takeover cam­paign in re­spect of hous­ing loans with top up fa­cil­ity, pre-ap­proved loans for li­a­bil­ity cus­tomers, out­bound tele-call­ing sys­tem for gen­er­a­tion of leads, etc cou­pled with com­pet­i­tive MCLR linked in­ter­est rate be­ing low­est at 8.35% wef 7 Jan­uary 2017.”

In ad­di­tion, there was close mon­i­tor­ing, fol­low up with re­gions/branches for speedy sanc­tion and dis­burse­ment of re­tail loans. Re­design­ing of re­tail loan prod­ucts was done in terms of in­crease in loan lim­its/ in­come mul­ti­plier/Fixed Obli­ga­tion In­come Ra­tio.

The bank has also un­der­taken ag­gres­sive tie-ups with builders/DSAs. There has been em­pan­el­ment of dig­i­tal DSAs for home and ed­u­ca­tional loans, ra­tio­nal­iza­tion of pro­cess­ing charges in re­tail loans and top up pro­gram for ex­ist­ing home loan cus­tomers. Me­hta says the bank has also un­der­taken hassle-free spe­cial home loan takeover cam­paign with an op­tion of ad­di­tional top up loan fa­cil­ity. Pre-ap­proved top-up limit of `20 bil­lion was of­fered to the bank’s ex­ist­ing 50,000 home loan cus­tomers, hav­ing sat­is­fac­tory track record. “We es­tab­lished out­bound tele-call­ing sys­tem for gen­er­a­tion of leads. Out­sourc­ing of Con­tact Point Ver­i­fi­ca­tion was done in Mumbai on a pi­lot ba­sis. Re­tail port­fo­lio pur­chase was re­sorted to. We also mod­i­fied prod­uct guide­lines for OD/ loan against prop­erty by in­clu­sion of non­in­di­vid­u­als in the scheme is­sued. There was pan In­dia roll out of pre-ap­proved credit lim­its in hous­ing, auto and per­sonal loan) for li­a­bil­ity cus­tomers,” adds Me­hta.

RISK-BASED PRIC­ING

The bank’s NPAs in re­tail seg­ment got re­duced to 3.41% as of March 2017 from 3.57% a year ago. Its NPAs in home loans have re­duced marginally at 2.43% in the last fi­nan­cial year. Out­bound tele-call­ing sys­tem for col­lec­tions was set up by the bank, which has al­ready con­trib­uted and will help in im­prov­ing the re­cov­ery po­si­tion thereby re­duc­ing the NPA level go­ing ahead. Me­hta says: “We have in­tro­duced risk based pric­ing in re­tail loans so as to main­tain the re­tail as­set qual­ity. Risk based pric­ing of home loan/auto loan/mort­gage loans has been linked to credit score. We have also in­tro­duced risk based pric­ing sys­tem in re­tail loans to as­cer­tain credit wor­thi­ness of cus­tomer at the time of sanc­tion of the loan so that the as­set qual­ity could be main­tained for en­tire ten­ure of the loan. Af­ter im­ple­men­ta­tion of this sys­tem, the qual­ity of new sourc­ing of re­tail loans dur­ing FY17 has also im­proved sig­nif­i­cantly.”

TAR­GETS

The bank ex­pects growth in home loans across all ge­ogra­phies and cus­tomer seg­ments. Says Me­hta: “We have set a growth tar­get of 31% growth un­der home loans seg­ment dur­ing the cur­rent fi­nan­cial year.”

Mayank Me­hta be­lieves the qual­ity of new sourc­ing of re­tail loans has im­proved sig­nif­i­cantly af­ter the bank has im­ple­mented risk based pric­ing sys­tem

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