IndusInd Bank plans to foray into MF, insurance, stock-broking segments

IndusInd Bank plans to enter para-banking segments such as insurance, asset management and stockbroking.

“We have a massive client base that is using these products. If you want total and complete client centricity, you need to give the full range of products. We believe that we now have the domain knowledge to manufacture these products. If there is regulatory blessing, we are definitely very interested,” said Romesh Sobti, managing director and chief executive officer.

The expansion would allow the bank to cash in on the huge amount of business that it is generating for partners. The bank plans to get into life, general, and health insurance. It will also have an asset management company and a brokerage firm under its fold.

Sobti said the bank was waiting for guidelines on financial subsidiaries for banks, which the Reserve Bank of India would soon be coming out with. 

The bank has partnered with Tata AIA for life insurance, Cholamandalam MS for general insurance and has an open architecture model for asset management.

Para-banking, or offering products and services beyond conventional banking, has become an important strategy for most banks, and contributes 15-30 per cent of the bank’s profits. 

Not only are banks pouring in money into their subsidiaries, the past few years have also seen some private lenders listing their financial subsidiaries for both value unlocking and raising capital for the parent.

IndusInd Bank would follow the acquisition route to gain entry into these businesses. “You no longer have to wait for 10-year gestation. The market has matured. There are players who want to encash or monetise and there are good assets available. So, the preferred route would be inorganic for all the three sectors,” said Sobti.

The private lender is not new to making acquisitions. It acquired non-banking finance company Bharat Financial Inclusion in 2018 and will merge the latter with itself. The merger, which will be completed within a month, is a major step for the bank to increase its focus and reach into rural India and microfinance lending.

The bank was also in the race to buy IL&FS Securities, the capital markets arm of the debt-ridden Infrastructure Leasing & Financial Services (IL&FS) group. Though the deal fell through, the bank is still looking at acquiring the IL&FS subsidiary.

The bank had also acquired Royal Bank of Scotland’s Indian diamond and jewellery financing business in 2015 and Deutsche Bank's credit card business in India in 2011.

Not only does IndusInd have a track-record of M&As to branch out into new segments, it also managed to land itself at a leading spot in these segments. 

The bank claims to be the largest diamond financier in India and among the top two banks in microfinance lending in the country. 

IndusInd’s expansion into para-banking services will mark a move away from the bank’s previous strategy, which had focused on distribution of products such as insurance and mutual funds, instead of manufacturing them. However, the bank has decided to expand its services due to the growth of the bank’s customer base and resources.