Dhanlaxmi Bank plans to focus on the self-employed , rather than the salaried class, as part of a strategy to increase its retail portfolio, particularly home loans.
Even though self employed customers are perceived as riskier, lending to them offers more opportunity for cross-selling of products, said Mr Arvind Halli, Head – Retail Assets and Credit Card, Dhanlaxmi Bank.
Explaining the rationale, he said for self employed customers the Loan to Value ratio (share of bank credit as part of the property price) is often lower, compared to a salaried customer.
For a salaried customer the LTV is usually as high as 70-80 per cent, while for a self employed customer it could be about 60 per cent, as he/she brings in a larger part of his or her own equity.
Besides, the bank can also leverage its relationship with the self employed customers by cross selling other products like a commercial vehicle loan or current accounts.
Gold loans
Mortgages, commercial vehicles and gold loans each have equal share within the retail loan portfolio. Going ahead, the share of gold loans within the retail portfolio may reduce to 15-10 per cent, Mr Halli said.
“Currently, the demand for gold loans is high because it also helps us meet our priority sector requirements. But going ahead, as we focus on mortgages and commercial vehicles, the share of gold loans would reduce,” he said.
As on June 30, retail portfolio accounted for 46 per cent of total advances, higher than 41 per cent as on March 31, and 18 per cent as on June 30, 2010. The mortgage portfolio of the bank as on June 30, was Rs 1,200 crore.
On the vehicle loans front, there is good demand for small commercial vehicles, especially those that are used for last mile connectivity, Mr Halli said.