PSU banks target personal loans to boost margins

Banks such as Allahabad Bank, Uco Bank, Union Bank of India and United Bank of India have prepared plans on how to sell personal loan products to the retail client.

The retail loan portion of these banks is far below the industry average and so they have to catch up. The retail loan share of these banks is mere 12-14% as against the industry average of 20-22%. These banks along with others had halted their personal loan segment due to fright of default after the financial slowdown.

JP Dua, chairman and MD of Allahabad Bank said, “Personal loan gives a better spread as well as it helps in building relationship”. The present retail loan share of the bank is 13.92% which it plans to raise to 22% over the next 3 years.

United Bank of India chief Bhaskar Sen said the home and car loan share would increase due to the rising purchasing power of the middle class customer.

He said, “The housing segment will continue to give banks businesses many more years. In the car loan segment, demand is seen especially in the small car category”.

Uco Bank chairman and MD SK Goel said: “We have identified 200 branches across the country to push retail loan products as our share of retail loan business is comparatively low.”

Bank of Baroda executive director RK Bakshi said “A higher share of retail loan is important for credit diversification. It’s a stable business and it improves relationship with customers”.