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In probably a first of its kind ‘loan against shares’ (LAS) offering, HDFC Bank is allowing customers to design their own loans.
The entire loan offering is digitised and is aimed at reducing the time taken for the loan approval and disbursement from four to eight days (across the industry) to 24 hours.
Instead of visiting the branch to select their shares they want to pledge for taking the loan, a customer can go online and through his demat account ‘set his own limits’ by choosing different combinations of shares that he would like to pledge with the bank.
Based on the selected shares, the algorithm chooses the quantum of loan eligible, helping the customer optimise and design his loan.
“Once the customer confirms the allotted loan amount, the bank arranges for signing the documents physically from the customer as per the regulatory mandate from the nearest bank branch to activate the loan limit and get it disbursed immediately,” said Arvind Kapil, Senior Executive Vice-President and Business Head - Unsecured Loans, Home and Mortgage Loans, HDFC Bank.
The bank conducted initial testing of the process for nearly three weeks in tier 2 to tier 5 towns, such as Haldia, Bhadrachalam, Karnal, Manesar and Muzaffarpur, among others.
The private bank claims to have 50 per cent market share among private players in the LAS segment and plans to double its business on an annual basis.
HDFC Bank plans to target proprietors and small businessmen that cannot use the LAS facility at present.
Loan portfolio
HDFC Bank’s loan against securities (shares) portfolio stood at ₹1,353 crore as on March-end 2015, a 21 per cent growth over the ₹1,121 crore recorded in the year-ago period.
“The (LAS) market of private banks is ₹500-600 crore per month…I expect our business to double under this new digitised format…This digitisation has a massive cost-to-income improvement. I won’t be surprised if we see an improvement of 15-20 per cent (in our cost-to-income ratio) on an annual basis,” Kapil said.
About a month ago, the bank reduced the disbursal time for auto loans to 30 minutes.
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