Even as other banks have stopped lending against shares, the IDBI Bank will be focusing on this sector. Its initiative to expand the retail segment will also see the private sector bank focusing on mortgages in the current fiscal.
Gunit Chadha, IDBI Bank managing director and chief executive officer, said: "The bank will be focusing on mortgages and loans against shares during the year. We will be cutting our interest rates in the next few weeks to make our products one of the most attractive in the banking system. The bank's current exposure to the capital markets is at around 2.6 per cent of the advances."
The bank currently offers loans against shares at 14.5 per cent, while the rate of interest on mortgages is currently at 13.35 per cent.
Most of the private sector banks have stopped advances against shares, having already breached the five per cent cap as stipulated by the Reserve Bank of India. These banks recently had to submit a time schedule to the Reserve Bank of India (RBI) on how they intend to reduce their exposure in this portfolio.
The revised RBI guidelines have identified banks to reduce their exposure in the capital market to under five per cent.
IDBI Bank does not have any investments in the capital market. However, Chadha added that the bank will focus more on the retail market as the bank is looking at going retail in a major way.
Currently, 95 per cent of the bank's business is corporate and the balance is retail. Chadha proposes to change this ratio in the next two years whereby retail banking will account for 25 per cent, while corporate assets will make up the balance 75 per cent.
Meanwhile, the bank is slated to become the clearing bank of the National Stock Exchange. According to Chadha, this will pave the way for IDBI Bank to rope in broker accounts and improve float funds and fee-based income.
The crux behind expanding the bank's retail business rests on the right infrastructure. Otherwise, Chadha said customer service will shown signs of strain as is happening with other banks.
The bank has also converted its entire operating technology platform to Finacle. According to the bank's chief technology officer, Neeraj B Bhai, "The conversion to Finacle has been completed in schedule. The bank will now be able to provide new retail products and actual anywhere banking. The front-end staff in the branches will now be able to have a better customer interaction."
