IDBI Bank turns sharply towards retail lending
Retail push banks on auto loans, personal loans & LAP:
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.
AUTO LOAN GROWTH HIGHER
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.”
NEW CLUSTER PRODUCTS
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.
CHANGING INTEREST RATES
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.
CONTAINING NPA LEVEL
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.
TARGETS, GROWTH PLANS
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.”
SS Banerjee refers to the setting up a separate group to intensify credit monitoring and follow-up to prevent fresh slippages