IDBI Bank turns sharply to­wards re­tail lend­ing

Re­tail push banks on auto loans, per­sonal loans & LAP:

Banking Frontiers - - Housing Hihglights - Me­hul@bank­ingfron­

Re­tail push banks on auto loans, per­sonal loans & LAP

While the over­all ad­vances of IDBI Bank de­clined in 2017-18, the growth in re­tail as­set port­fo­lio was broad-based in all sub-seg­ments. The bank made con­scious ef­fort to boost the share of its re­tail and pri­or­ity sec­tor lend­ing (PSL) port­fo­lio in the to­tal ad­vances as a part of its busi­ness strat­egy to re­bal­ance the busi­ness mix. The strate­gic ini­tia­tives saw in­crease in the share of re­tail ad­vances to to­tal ad­vances rise to 45% yoy at endMarch 2018, with cor­re­spond­ing de­cline in the share of cor­po­rate ad­vances.

Dr S.S. Ban­er­jee, ED of the bank, says while the over­all ad­vances de­clined by 6% on a yoy ba­sis in 2017-18, the struc­tured re­tail as­set port­fo­lio and the PSL port­fo­lio grew by 15% and 5%, re­spec­tively, yoy. The bank also achieved all its reg­u­la­tory tar­gets for PSL in 2017-18.


The bank’s struc­tured re­tail as­set port­fo­lio grew 15% yoy in 2017-18 as com­pared to 7% in 2016-17. The high­est growth was reg­is­tered in auto loans (30%), fol­lowed by per­sonal loans (27%) and loans against prop­erty (26%). Says Ban­er­jee: “Home loan seg­ment, which ac­counts for 70% of the struc­tured re­tail as­set port­fo­lio, grew by 11%. The bank’s ed­u­ca­tion loan port­fo­lio grew by 10% dur­ing 2017-18.”


The bank con­tin­ued to in­tro­duce new prod­ucts and re­view the fa­cil­i­ties /pro­cesses of ex­ist­ing prod­ucts to meet the emerg­ing needs of the cus­tomers. It has in­tro­duced 6 new area-based clus­ter prod­ucts for the MSME seg­ment - leather footwear/leather prod­ucts in Agra, tiles and ceramic prod­ucts in Morbi, Ra­jkot, auto com­po­nents in Chen­nai, bi­cy­cle/bi­cy­cle parts/ma­chine tools/ fas­ten­ers in Ludhiana, pharma in Hyderabad and fab­ri­ca­tion, en­gi­neer­ing, elec­tri­cal and auto an­cil­lary in Okhla, New Delhi.

“Go­ing for­ward, the bank is plan­ning to im­ple­ment end-to-end dig­i­ti­za­tion of loan pro­cess­ing sys­tem for pri­or­ity sec­tor prod­ucts and also en­able on­line loan ap­pli­ca­tion and track­ing fa­cil­ity for ap­pli­cants,” says Ban­er­jee.


The move­ment in the bank’s MCLR is de­ter­mined by mar­ginal cost of funds, op­er­at­ing cost, tenor pre­mium and neg­a­tive carry on ac­count of CRR, mak­ing it more re­spon­sive to the changes in the repo rate by the RBI. Ban­er­jee says in 2017-18, the MCLR was low­ered in 2 in­stances in tan­dem with the re­duc­tion in the pol­icy rates as also as aided by re­duc­tion in its cost of funds.


The bank has been fac­ing el­e­vated NPAs, which are mostly con­cen­trated in the bank’s cor­po­rate port­fo­lio. Its gross NPA and net NPA ra­tios stood at 27.95% and 16.69% re­spec­tively as on 31 March 2018. It has taken proac­tive mea­sures to con­tain fresh NPAs and max­i­mize re­cov­ery and upgra­da­tion of the ex­ist­ing stock. Says Ban­er­jee: “We have set up a sep­a­rate ver­ti­cal - NPA Man­age­ment Group - for fo­cused ac­count-spe­cific res­o­lu­tion strate­gies and close mon­i­tor­ing. This has helped im­prove re­cov­ery and up-gra­da­tion to `62.31 bil­lion in 2017-18 from `48.49 bil­lion in 2016-17. Fur­ther, we have also set-up a Credit Mon­i­tor­ing Group for off­site mon­i­tor­ing of all credit ex­po­sure of the bank, to in­ten­sify mon­i­tor­ing and fol­low-up to pre­vent fresh slip­pages.”


The bank has been lever­ag­ing its IT ca­pa­bil­i­ties to of­fer a bou­quet of fi­nan­cial ser­vices and prod­ucts. It is in the process of up­grad­ing its CBS for en­hanced pro­duc­tiv­ity and ef­fi­ciency. Some of the IT-en­abled projects in­clude En­ter­prise-wide Data Ware­house So­lu­tion, En­ter­prise-wide Fraud Risk Man­age­ment So­lu­tion, and Au­to­matic Loan Ap­pli­ca­tion Pro­cess­ing Sys­tem (ALPS) for MSME and agri­cul­tural loans.


Ban­er­jee is of the view that tier 2 & 3 towns present a strong busi­ness case for banks, es­pe­cially for the re­tail loan prod­ucts such as hous­ing loans, car loans, 2-wheeler loans, etc. The govern­ment push for af­ford­able hous­ing has cre­ated a mar­ket for mid-bud­get houses, which has, in turn, pushed up the de­mand for home loan. Fur­ther­more, the ex­pand­ing pop­u­la­tion of young work­force has also pushed up the de­mand for auto loans.


The bank has been work­ing to­wards re­align­ment of the busi­ness mix in fa­vor of re­tail and pri­or­ity sec­tor lend­ing busi­ness while lim­it­ing growth in its cor­po­rate loan book, es­pe­cially in the large cor­po­rate seg­ment. Says Ban­er­jee: “This strat­egy has been adopted is in pur­suance with a cap­i­tal light busi­ness model as it would fa­cil­i­tate the bank to re­duce its Risk Weighted As­sets as also help in im­prov­ing the qual­ity of the bal­ance sheet. Fur­ther­more, we are also tak­ing proac­tive mea­sures to en­hance our ca­pa­bil­i­ties in terms of im­proved cus­tomer ser­vice, field sales ex­cel­lence and an­a­lyt­ics driven sales.”

Au­gust 2018

SS Ban­er­jee refers to the set­ting up a sep­a­rate group to in­ten­sify credit mon­i­tor­ing and fol­low-up to pre­vent fresh slip­pages

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