StanChart to go low on personal loan business

Standard Chartered Bank has decided to reduce its personal loans business and from now will be focusing on cross selling to its existing customers. The bank will also be tightening its processes of other unsecured lending products. By this move of bank a couple of hundred bank’s sales force is likely to get affected. Most of other banks are using direct sales agent (DSA) network while StanChart will be using its own sales force rather than the direct sales agent (DSA) network.

StanChart’s decision has come following the ICICI bank decision of focusing on selling its two-wheeler loans only to its existing customer-base. The banks decision has come in line with the increased delinquencies in this space for most players. The default in personal loan segment for most banks stands at 5-6%, as against 2% of the entire loan portfolio sometime ago. In the beginning, the rise in default for most banks was mainly in small-ticket personal loans. With the rising interest rates and the collection problems has affected the personal loan portfolio of most banks.

When enquired from Standard Chartered Bank head (consumer banking) Shyam Srinivasan said: “Stanchart continues to be focused on credit cards while focusing on the established existing customer base and new bank customers in targeted segments. On personal loans, given the market cycle at this point, we will offer the product only to existing customers of the bank.”

Most of the foreign and private sector banks have reduced the disbursements in the personal loan business and have also tightened distribution norms on the credit card side. StanChart will be selling personal loans only to its pre-qualified existing customer base, which have clear track records. The bank is having an internal customer-base of 2.2 million, including credit card, SME, saving and current account customers among others.

In the past couple of years the bank has cut down its credit card portfolio as well. In recent times, default on credit cards has gone up around 12% on an average for most players. According to sources this number is much lesser for StanChart.

According to bank officials the reason for the change in business mix is not related to the performance of its own portfolio. In the last few months leveraging among customers has increased. Currently StanChart is having around 60% of personal loan customers who are external customers.

In the credit card segment the bank has 1.38-1.4 million customers. Bank officials told, banks most important business is credit card segment, at present there are no plans to exit from it.

In the past few years, the bank for its credit card customers has increased income criteria. Now it is only focusing on the upper-middle and mass-affluent customer base; mainly with base annual incomes of over Rs 5 lakh. One-and-a-half years ago, this amount stood at around Rs 1 lakh and the bank is sourcing only around 10-15% of the customers in this segment. Sourcing is also done from StanChart’s internal customer base.

Another product on which the bank is focusing more on its internal customer base is the Smart Credit facility, using this facility customers can take overdrafts on their accounts.

In the past couple of years, StanChart has used its own sales force of around 1,800 people, rather than the direct sales force. A couple of hundred people are believed to have been affected by this decision, although this number could not be confirmed. Bank officials also added that all high-performers have been shifted to the mortgages, transaction banking and SME segments. At present, on the secured portfolio, the bank main focus is on mortgages, which is still seen to be growing strong.

It is believed that soon most players will be following the similar steps as defaults continue to grow.