Why has Kotak Mahindra Bank decided to acquire Standard Chartered’s loan book in India? – Firstpost

Kotak Mahindra Bank announced Friday (October 18) it will acquire Standard Chartered Bank’s personal loan portfolio in India, as the UK-based lender shifts its focus toward wealth management and investment banking in Asia’s third-largest economy.

Standard Chartered’s personal loan book had an outstanding balance of Rs 41 billion ($488 million) as of September 30, according to Kotak Mahindra Bank.

The deal is expected to close within three months, pending regulatory and other approvals, Kotak said.

A competitive personal loan market

India’s personal loan market has become increasingly competitive due to strong consumer demand. In November last year, the country’s central bank, the Reserve Bank of India (RBI), directed lenders to allocate more capital for personal loans, citing concerns that rapid demand growth could heighten risk.

As a result, the growth rate of personal loans in banks’ portfolios slowed to 17 per cent year-on-year in August, down from 18.3 per cent the previous year.

Kotak Bank senses an opportunity

“India’s unsecured lending market offers significant growth potential for Kotak, especially in the higher-end segment,” said Ambuj Chandna, head of products for Kotak Mahindra Bank’s consumer division.

The transaction will involve so-called standard loans— those performing well and not showing signs of distress or default, as outlined by RBI in its guidelines.

What happens to Standard Chartered’s India business?

“Our decision to divest the personal loan book is in line with the bank’s focus to accelerate growth in the wealth, affluent and SME (small and medium enterprises) segment,” said Aditya Mandloi, Standard Chartered Bank’s head of wealth and retail banking for India and South Asia.

Mandloi also noted that India remains a key market for Standard Chartered, and the bank plans to continue investing in its operations there.

With inputs from Reuters