Development Credit Bank reduces the share of personal loans in its credit portfolio
By Neelima Shankar
Nov 14, 2007
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New Delhi: Small ticket personal loans are a risky business and with major players like ICICI Bank deciding not to lend such loans to sub-prime segment anymore, other banks are also waking up. Development Credit Bank (DCB), a small but well established private sector bank in India has also decided to diversify by selling home loans and reducing the share of personal loans in its entire credit portfolio.

Like other banking majors, DCB has also witnessed a rise in defaults in personal loans and thus an increase in its non-performing assets. Gautam Vir, acknowledging this fact said, “The prospects of loan defaults are higher in case of personal loans. We plan to bring down the share of personal advances in total retail loans from 47 per cent to 35 per cent over the next financial year.”

As a part of this process DCB has decided to give a fillip to its commercial and construction loan segment. It has set a target to raise the share of this segment from existing 45 percent to 55 percent. To extend such loans to its customers DCB has tied up with HDFC, one of the leading home loan providers in India. “This (home loans) is not our area of expertise (which is volumes business). The bank will focus on origination and servicing customers,” Vir said.

As of September 2007, the total value of personal loan given by DCB stood at Rs. 713 crores, while commercial loans accounted fro Rs. 279 crore. As a step to mitigate risks and tackle the non-performing assets, DCB has already bid farewell to small-ticket personal loan segment, which is the most risky loan space for bankers.

DCB is also planning expand its reach, particularly in the western part of the country (Maharashtra, Gujarat, Goa, Andhra Pradesh, National Capital Region and Rajasthan), and it has applied to the Reserve Bank of India (RBI) for a permission to open 50 more branches. “We will continue to expand the region (western), where the growth is high and our brand is known. We will also open branches at SME clusters outside the western region”, he said.

DCB was converted into a Scheduled Commercial Bank on May 31,1995, in the wake of India’s economic liberalization. It was the only co-operative bank, which successfully crossed over and thrived in the face of change. Development Credit Bank (DCB) is one of the emerging private sector banks in India and provides to its customers, access to over 18,000 ATMs and 80 state-of-the-art branches and extension counters spread over ten states and two union territories. DCB offers both secured and unsecured loans and it gives Personal Loans, Easy Business Loans, Loan Against Gold, Auto Loan, Two wheeler Loan, Commercial Vehicle Loans and Construction Equipment Loans at attractive terms and conditions.

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