The Hindu Business Line : NBFC tie-ups help UTI Bank grow retail assets fast

UTI Bank expects its retail assets to grow nearly 10 times in two years, from Rs 247 crore as at March 31, 2002 to Rs 2,100 crore by the end of this year. This growth came about mainly by the bank buying retail loan assets from the market.

"We realised that retail financing from the grass-root level would be difficult for us," said Mr Sujan Sinha, Vice-President (Retail Assets), at a conference of branch managers of the Shriram group, in Bangkok, last week.

UTI Bank therefore entered into alliances with a few non-banking finance companies, including two companies of the Chennai-based Shriram group, Shriram Investments Ltd and Shriram Transport Finance Company Ltd.

The bank has a similar relationship with Srei International Finance, Kolkata.

UTI Bank is also close to picking up five per cent stake in each of the two Shriram group companies. Mr Sinha said under the arrangement, the alliance partner would generate retail loans and after a period of seasoning, would transfer the loans to UTI Bank. Any delinquency during the seasoning period would be to the account of the partner.When the bank commenced the relationship with the Shriram group in September 2002, it had set a credit limit of Rs 270 crore. The limit has since been increased to Rs 500 crore. Now, negotiations are on between the bank and the Shriram group to raise this limit further.

Mr Sinha said while the bank set store by retail assets, it was not too keen on housing finance. While the bank does have a home loan portfolio — about 30 per cent of the total retail assets — it is cautious in its approach to this sector. The feeling in the bank is, who knows how the housing market will behave over long periods of time.

Mr Sinha said that UTI Bank was the only bank to have a full-fledged disaster recovery centre — at Bangalore, managed by Wipro — which updates data every two minutes.