The Hindu Business Line : Want a personal loan? Go to an ATM

Hyderabad, Dec. 25 “You are eligible for a pre-approved personal loan of Rs 5 lakh. Press yes if you are interested.” This is the message you might see during any transaction at ATMs of leading private banks as they are now leveraging technology to ensure quality due diligence and low-cost marketing.

In the place of traditional agency or franchisee-based marketing of retail loans, banks are now increasingly using enterprise resource planning solutions and ATMs.

“Marketing retail products through ATMs is non-intrusive and customer-friendly. As we have a data-base of customer transactions, we make an estimate of his needs and offer a retail product. If there is a confirmation from the customer, we go ahead with other procedures,” Mr Sanjeev Patel, Executive Vice-President & Head, Direct Banking Channels, HDFC Bank, told Business Line.

“In ATM-based marketing, the cost of contacting the customer through out-bound mechanism is lesser. However, it cannot fully replace physical verification prior to loan sanctions.”

The trend is in line with the recent dip in the direct marketing expenses of the banks. The direct marketing expenses of ICICI bank in the second quarter had decreased by more than half. For the three month period ending September 30, 2008, its expenses were at Rs 144.50 crore as compared with Rs 385 crore in the year-ago period.

Due Diligence

Apart from being customer-friendly, the new marketing tools will also ensure quality assets for the banks, say experts. “Due to current economic conditions, retail advances (especially personal loans) to the non-customers of the bank have come to a negligible level. We first ensure that there are no defaults and check-bounces in a customer’s account before offering a loan,” said a senior ICICI bank official.

This would also help in tackling the issue of growing non-performing assets, he added.

Last week, Reserve Bank of India has cautioned banks to ensure credit quality as the bad loans in new generation private banks and foreign banks are “more noticeable”.

Some customers are also happy with the tech-marketing. “When I applied through an ATM of ICICI Bank, I got a follow-up call within a day and loan was sanctioned in three days. As checking the account transactions is vital in loan-approval, it is good that they are at it before offering the loan,” said Mr H.M. Murthy, a senior official in the Railways.

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