Indusind Bank goes online for loan disbursals; expects auto and construction to fuel lending

MUMBAI: IndusInd Bank expects that demand for loans to buy commercial vehicles and construction equipment will continue to fire its credit growth in the fiscal year ending March 2017 even as its board of directors approved a digital strategy that will reduce the size of branches and route more transactions online.

On Thursday IndusInd announced a 25 per cent increase in net profit to Rs 620 crore in the quarter ended March 2016 compared to Rs 495 crore in the previous year driven by both interest as well as non interest income.

“There has been an encouraging trend for the future of interest income growth. Going ahead we will also balance our retail and corporate portfolio equally and the non- vehicle consumer loan portfolio will also increase,” CEO Romesh Sobti said.

The government’s infrastructure spending push will spur growth in construction equipment which will keep credit growth for the bank high said SV Parathasarthy, head consumer finance.

“Last fiscal our commercial vehicle book grew in double digits, faster than the industry and this year we expect the construction equipment also to show a strong growth because of the government spending particularly in roads,” Parthasarthy said.

Small and large commercial vehicles make up 20 per cent of the bank’s book. But non vehicle loans like credit cards, loan against property and gold loans are growing at a fast clip which will also help the bank reduce the percentage of corporate loans in its portfolio.

Consumer loans including vehicle loans now consist 44 per cent of IndusInd’s loan book up from 41 per cent in March 2015. Sobti said the bank will ensure that the corporate to retail loan ratio is 50-50.

IndusInd’s board has also approved a digital focus which will cut costs by making branches leaner and could also result in higher incremental revenues for the bank. “This will lead to reconfiguration of branches and more transactions will be through our hubs in Mumbai and Chennai. We have studied the models in developed markets and also taken help from some technology companies like Gartner,” said Paul Abraham, COO.

Online transactions are done at 1/10th the cost of a branch. IndusInd has 1000 branches currently and plans to add another 200 this year, mostly in smaller towns and rural areas.