IndusInd to re-enter personal loans

The Hindujas-controlled IndusInd Bank plans to re-enter the personal loan business after having almost stopped extending loans about two years ago.

The bank may launch personal loan products in October-December, said a senior official of the bank. “We are looking at launching the products in a selective way. Initially, the product, which is scheduled to be launched in the third quarter of the financial year, will only be sold to the bank’s existing clients,” the official said.

The private sector bank will, however, adopt a cautious approach in granting personal loans, a business characterised by high delinquencies.

The bank’s exposure to the personal loans segment is a mere Rs 200 million, against total outstanding loans worth Rs 130 billion.

The bank has about 2 million clients. The ticket size of the personal loan product will range from Rs 50,000 to Rs 300,000.

“As of now, personal loans do not constitute any asset class of the bank. We are looking at building up that portfolio,” the official said. Two years ago, the bank had almost exited from the personal loan segment as it focussed on building its automobile and commercial vehicle loans business after taking over a non-banking finance company—Ashok Leyland Finance.

About 70 per cent of IndusInd Bank’s lending is targetted at the retail sector, with a sizeable exposure to vehicle financing.

Personal loan is a high-risk-high-return business and most banks are shying away from being aggressive in this segment due to fears of rising default.