The Hindu Business Line : IDBI Bank eyes housing portfolio

IDBI Bank Ltd is likely to acquire retail portfolios of other banks or finance companies once clarity on its merger with parent, Industrial Development Bank of India (IDBI), emerges.

"The corporate office is seriously looking into it... a buyout of housing portfolio perhaps from a housing finance company," may be on the cards, said southern region head, Mr J. Venkataramanan. However, he did not detail the target size of such portfolio.

The bank's growth in recent past has been fuelled by retail thrust, housing segment being the prime driver.

In the last 18 months, retail business for IDBI Bank has topped Rs 1,000 crore and housing finance contributed close to "80 per cent" or Rs 800 crore.

The housing finance market has expanded tracking a soft interest rate regime that saw lending rates drop as much as to 8.5 per cent over last two years. IDBI Bank that caters to close to 7.5 lakh customers in the country, a major part of them is retail clients.

It can be recalled that Dewan Housing Finance, a non-banking housing finance company, recently bought over the housing portfolio of ING-Vysya Bank. Banking sources said that there were at least two leading domestic private banks that could offer its housing portfolio for sale. But in cases of total portfolio buyout, IDBI Bank is expected to do a bit of cherry picking.

According to analysts, IDBI Bank is likely to swell its asset portfolio through inorganic route only after IDBI and IDBI Bank merger issue is settled. The merged entity will be called a corporate bank and not a universal bank and post-merger the combined entity is unlikely to face severe asset-liability mismanagement, analysts said. Several advanced management tools like securitisation is likely to help the entity to clean up its balance sheet.

The Cabinet has referred the IDBI Corporatisation Act to the parliamentary standing committee for necessary amendments and a final order in this regard is likely to be issued by June. The merged entity is likely to help IDBI garner cheap credit.

The financial institution has brought down its non-performing assets to 11.8 per cent from 14 per cent and has managed to recover close to Rs 450 crore of bad loans.

Meanwhile, IDBI has asked for presentations from at least 10 consultants like KPMG and Ernst & Young on the merger issue and has initiated the evaluation process.

Asset transfer to the merged entity from the institution will be done over a period of time and an asset reconstruction company will be created to take over the non-performing assets.

As on March 31, 2002, IDBI had gross NPAs of around Rs 10,000 crore.

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