MUMBAI: IndusInd Bank, which announced its first quarterly results post the completion of Bharat Financial Inclusion Limited (BFIL) merger, said it has slowed down lending in the microfinance segment in a few states like West Bengal and Odisha temporarily, as a matter of caution. The market in those states indicated an “overheated situation”, which made the bank to slow down lending consciously, bank officials told reporters on Friday.
“We tightened lending norms on our own,” said MR Rao, MD & CEO of IndusInd Financial Inclusion Limited (IFIL). Pursuant to the merger taking effect from July 4, Rao, who was the MD & CEO of BFIL, became the IFIL head. He said the loan sizes were getting quite high in West Bengal - Rs 43,000 per borrower as against the bank’s average loan size of Rs 23,000 per borrower - and in Odisha, there was a report of 4 per cent multiple lender cases.
“We have become more stringent in these two states, that’s all. The overall loan book has grown very handsomely,” said Romesh Sobti, MD & CEO of IndusInd Bank Ltd. Rao said this is a temporary measure after watching the situation on the ground since January, and that in a couple of months when the situation eases, will go back to normal.
Overall, the bank’s credit growth was 24 per cent higher on year in the first quarter of the current financial year, and despite a slowdown in vehicle sales, recorded strong growth in vehicle financing, increasing its market share. However, Q1 growth was the slowest since the post-Lehman 2009-10 period, the bank said. After the major write-off against the IL&FS loans in Q4 of last year that dented the bank’s profits, IndusInd bounced back to report 38 per cent increase in net profit to Rs 1,433 crore in Q1 this year.
“IndusInd Bank’s Q1FY20 results were strong, helped by higher margins and lower credit costs... However, the watch list continues to be an overhang, and we opine that the ~65BPS credit cost guidance for FY20E continues to be a challenge for the bank,” said Lalitabh Srivastava, AVP Research, Sharekhan by BNP Paribas.