IndusInd Bank to focus on real estate business

In the investor presentation, IndusInd Bank laid out real estate as a key business

Private sector lender IndusInd Bank has now decided to focus on the real estate business, after a gap of almost six years. The lender has decided to focus on financing construction of projects and the loan against property (LAP) business.

“Real estate is an area that for five-six years we ignored and we felt we ignored it because we did not think we had the skill to manage the business. But there is good business embedded in the real estate business, not all business is bad. So we have now hired the skills, we have skills in-house to manage this business and we will take our first steps into real estate and financing,” said Romesh Sobti, managing director and chief executive officer, IndusInd Bank, in an analysts’ conference call.

In the investor presentation, the bank has laid out real estate as a key business. At the end of FY14, real estate constituted 2.41 per cent of the corporate loan book. Analysts believe this comes at a time even when other banks continue to remain cautious on lending to real estate companies.

On the retail front, the bank has lowered its interest rate on savings account to the standard four per cent from 4.5 per cent on balances up to Rs 1 lakh from May this year.  However, despite reducing the rates, the bank is confident of an increase in its share of Casa (current account and saving account) deposits this financial year.

“Casa should exceed 35 per cent and I think we are nudging 35 per cent already. So internally certainly we have upped our ambition on the Casa target and we hope that in the next two or three years instead of 35 per cent we have an ambition to get closer to 40 per cent,” said Sobti.

In order to grow the Casa deposit business, the bank has been focusing on the self-employed and the emerging corporate business.

At the end of the fourth quarter (January-March) of FY15, Casa deposits grew by 28 per cent year-on-year and constituted about 34.1 per cent of total deposits.

Despite reducing the interest rate, the bank is confident of growing the Casa business as it has been able to add about 65,000 new customers every month.

Apart from this, cross-selling more products to the existing customers has also helped the bank in growing the low-cost deposits segment.

The bank has also been expanding its footprint to grow the Casa segment. Sobti added they have seen a clear link between branch expansion, Casa growth and fee growth and as a result the focus has been on doubling the footprint between 2014 and 2017.

At the end of FY14, the branch network stood at 602.