After seeing an unexpected rise in sticky loans in its consumer finance business in India, Citibank has said it is not exiting the business and will reposition it instead. The bank has also pumped $250 million (Rs 1,000 crore) by way of capital into its Indian operations.
?Our consumer finance portfolio is large in Citi Financial, which offers finance to low?and middle?income consumers. While we are not interested in exiting this business, we plan to reposition and re-segment the consumer base,? said Sanjay Nayar, CEO, Citi India.
Elaborating further, a bank spokesperson said Citi would look at relocating some branches or clubbing some together to offer more enhanced products like insurance and credit cards. However, the bank has also made it clear that there are no plans to sell consumer finance assets.
“We are not selling (the loan portfolio)… we may change certain segments,” Nayar said, without elaborating. Currently, Citi Financial?the non-banking finance arm of Citi?has about 4,500 branches across the country and serves retail customers.
Nayar was speaking on the sidelines of a press conference, wherein Citibank committed $1.5 million to the Indian School of Business, Hyderabad, to promote financial inclusion among small investors and enterprises. Nayar explained that NPAs in the consumer finance business have been very large. ?Owing to high NPAs, larger than forecast, we decided to reposition the business,? Nayar said.
Nayar said the retail finance industry has over-leveraged the potential of the market. Also, poor pricing and ?not-so-great underwriting standards? have resulted in higher bad debts in the retail finance segment. The returns from its Indian operations were satisfactory and the increase in NPAs was due to what he said was “over-leveraging” by newer entrants to woo customers.
Citi has also raised $500 million (around Rs 2,000 crore) through its infrastructure fund, Nayar said. The fund, which was raised in association with Infrastructure Development Finance Company, will invest in infrastructure projects.
