IndusInd high on vehicle finance

The segment will cover half of the bank's advances in 3 years.

Private sector IndusInd Bank is bullish on financing commercial vehicle purchases. The bank wants to increase its vehicle financing business from 40 per cent of the total disbursements in 2005-06 to 50 per cent in the next three years.

Vehicle financing accounts for almost all of IndusInd's retail lending business. The bank's retail loans book constitutes 48 per cent of the total.

The bank's total loans at March end stood at Rs 9,310 crore.

Bhaskar Ghose, managing director, said, "The bank would continue to focus on its core competency (vehicle financing) as the average yield in the business is 150 basis points higher compared with home loans."

He also felt that risk management in vehicle financing is better compared with home loans particularly due to mismatch on the tenure side. The tenure of funds available with banks matches the tenure of loans for vehicle purchases, which is not the case for home loans.

IndusInd got into vehicle financing following the merger of Ashok Leyland Finance with itself a couple of years ago. Ashok Leyland Finance had nearly 200 offices across the country exclusively engaged in providing loans for commercial vehicle purchase.

In the next three years, the bank aims to increase its retail portfolio to 55-60 per cent of the total advances from the present level of 48 per cent. On the retail deposit side, the bank aims to increase it to 60-65 per cent from 30-35 per cent in 2005-06.

The bank aims to increase current and savings account (CASA) balances to the peer group level of 30-35 per cent of the total deposit base. IndusInd's CASA balances are currently very low at 13 per cent.

On the wholesale side, the bank plans to continue its focus on the small and medium enterprises (SMEs). "From profitability stand point, relationships with SMEs are more remunerative. Recently, the bank set up investment banking division. It has since got 20 mandates mostly from medium-sized companies."

The bank will open six new branches in the next two-three weeks to add to the 145 branches already operational. In 2006-07, the bank intends to convert 60 erstwhile offices of Ashok Leyland Finance into its branches, subject to regulatory approvals. It will also apply for 25 branches more.