IndusInd Bank rejigs loan portfolio

IndusInd Bank is planning to re-balance its retail portfolio by reducing its dependence on vehicle financing on account of the rising interest rate risks. The bank had earlier decided to offer personal loans only to customers with corporate salary accounts due to fears of defaults. “As a part of our overall strategy, we want to reduce the share of vehicle finance loans in our total loan book to about 40 to 45 per cent from the existing 58 per cent,’’ said managing director, Bhaskar Ghose. Over dependence on a particular business segment could expose a bank to the risk of credit concentration. "These loans are 2 to 3 years, fixed rate loans. Attempts to convert these fixed rate loans to floating rates have not been accepted by the market. Hence, there is a interest rate risk in this business segment," added Ghose. Fitch ratings has downgraded IndusInd Bank (IBL’s) rating citing weak financials compared with its peers and continued vulnerability in a rising interest rate scenario. The proportion of fixed-rate retail loan stood at 60 per cent, while wholesale term deposits constituted 75 per cent of the bank’s total deposits.