Private sector lender City Union Bank (CUB) is comtemplating entering into co-lending activities in gold, vehicle and housing loan products, in collaboration with gold loan firms and other NBFCs.
The bank has initiated preliminary discussions with gold loan companies whose main areas of operation is predominantly non-Tamil Nadu and a few of the NBFCs based in Tamil Nadu where the bulk of the lending is happening on the vehicle front.
N Kamakodi, MD & CEO of CUB, speaking at an earnings call, said that the bank has kick-started the first-level interactions on the new initiatives. “What we are basically looking forward is the co-lending opportunities in the secured advances. Predominantly we are expecting them to be in either the gold loan front or vehicle front or the housing loan front,” he said.
On the gold loan co-lending front, he said those gold loan companies with whom the bank is discussing opportunities, the majority of their business is coming from outside of Tamil Nadu. “But the the names and other things, which I don’t want to disclose now. Basically, their main areas of operation is predominantly non-Tamil Nadu,” he said.
CUB had recently appointed Boston Consulting Group as consultant to upgrade its existing digital lending processes, with a view to increasing focus on retail products such as housing, vehicle and personal loans.
The bank expects the new portfolio of the co-lending accounting for up to 15% of the overall loan book, over a period of time. “When we use the capacity created by the NBFCs and other fronts, this should come close to about 7% to 10 % of our overall loan book may be five years down the line. Under the retail, our regular MSME, commercial trading and gold loan can have a growth rate of about 10% to 11% and incrementally about 25 % of the growth rate will be constituted by these new lines of activities. Together, they should be constituting about 12 to 15 % in our overall book in a 4- to 5-year time-frame.” he said.
Regarding initiation of digital lending, he said the bank is starting with its existing customer base. “So, it will first start with the MSME lending, of less than Rs 5 crore. Parallelly, it will process the renewal which will give a lot of free space in our processing capacity,” Kamakodi said.
CUB board had recently formed a sub-committee for a smooth succession planning for finding a replacement for the incumbent MD & CEO Kamakodi whose tenure ends in 2026. The committee is assigned with the task of finding a successor and ensure a smooth transfer of responsibility when the tenure ends.
Kamakodi said : “we are taking measured and right steps towards the growth in advances, enhancing the customer experience by a way of digitalised lending and better efficient underwriting methodology. This may take a few quarters to show the benefits in our top line and bottom line. We are working hard to achieve the FY ’24 double-digit advance growth between 12 to 14 %.”