IndusInd Bank plans foreign tie-ups to boost NRI deposits

IndusInd Bank may tie up with local banks in Dubai, United Kingdom, United States, South East Asia to take advantage of its high networth individuals non-resident Indian stakeholders and mop up more foreign funds, said managing director Bhaskar Ghose on Wednesday. Currently, about 10-15 per cent of total deposits are NRI deposits.

"Today, most of the local business of the HNIs is not going to the local banks. They typically bank with the big international players," Ghose said. The private sector bank has approached an Arab bank for access to 15 of its branches.

"In return we will offer our branch network in India and would also bring a part of the local business to you," Ghose said. However, he declined to disclose the names of the banks. Such a partnership would not require any additional investment, Ghose said.

Ghose also declined to comment on the amount of NRI business that it expects from the new initiative. "It would be a substantial amount. However, things are still on a planning stage," he said.

Meanwhile, following a hike of 25 basis points in reverse repo rate and repo rate by the Reserve Bank of India, IndusInd Bank raised its short-term deposits rates, of 7-90 day maturity, by 25 basis points to 5.25 per cent.

"We don't want the call money rates to go ahead of deposit rates," Ghose said. The bank also plans to hike its commercial vehicle loan rates and home loan rates.

"The truck loan rate hike was long overdue. And recently the RBI's commenton asking banks to exercise caution in certain sectors of real estate loans may have a dampening effect on the sector, which may pressure rates upwards," Ghose said. Currently, the average yield on commercial vehicle is 8.5 per cent.

The bank also announced its quarter ended September result today. The net profit of the bank dipped to Rs 314.9 million in the second quarter of the current financial year from Rs 589.1 million in the same period previous year.

"The dip in profit is due to temporarily reduced net interest margin, lower trading profit on sale of investments, and higher operating expenses," Ghose said.

The bank's net interest margin slipped to 2.24 per cent in quarter ended September from 2.77 per cent in the previous year. The bank is planning to come out with a Tier-II capital issue within a couple of months.

"We have a headroom of Rs 1.50 billion in Tier-II. But we have not decided whether to raise the entire amount in the first tranche or do it in phases," Ghose said.

The bank is also planning to come out with a Tier-I issue within 9-12 months and the issue size is likely to be around 4.50 billion. "We need capital, but we have not yet decided whether to make a private placement or a GDR (global depositary receipt) issue," Ghose said.

The bank's capital adequacy ratio is at 10.88 per cent. The bank, which started with a corporate focus, is trimming down its corporate book and shifting towards a bigger retail portfolio. "We can take advantage of the ALFL (Ashok Leyland Finance) branches and increase our retail book," Ghose said.

ALFL, a non-banking finance company, merged with the bank last year. "My retail advances will give me higher yield on advances than the corporate loans," he said.