Tata Capital to tap young Pros to Grow Personal Loan Book
Tata Capital, the non-banking finance company of the $104-billion Tata Group, is betting on the demand for cars, vacations, or iPhones from India's young professionals to build its portfolio of personal loans, underscoring a minimum-risk expansion strategy for this segment.
Advances will be limited to about Rs 15 lakh, and the ideal borrowers would be people in the age bracket of 20 to 35 years, earning a steady salary in a job with a defined career path. The strategy appears to expose the company to minimal risks for expansion of the personal loans business that Tata Capital entered 15 months ago.
On Thursday, the company started a mobile application that will harness data from social networking sites -Facebook, LinkedIn and Google plus -to approve loans to these customers.
We have started personal loans recently because we wanted to focus on profitability initially, and that comes from large-ticket loans, such as home mortgages and commercial advances,“ said Govind Sankaranarayanan, COO, retail business and housing finance, Tata Capital. “With this new appli cation, we are confident that we can reach out to many new customers.“
Cars, two-wheelers, and electronic gadgets have become India's visible symbols of consumerism over the past decade as discretionary incomes increase in the South Asian nation.Credit costs in the country, once among the highest in Asia, have also trended south, making purchases of consumer goods affordable for many buyers. For most banks and finance companies, the retail portfolio has helped offset tepid demand from companies that are struggling to beat a pronounced supply overhang in Asia's third-largest economy.
The application called `myLoan' will hunt the social media to generate about 800 data points on employment history, employment stability, personal character, interests, behaviour, social contacts, utility bill payment history, and location to judge the creditworthiness of the borrower.
Retail loans now account for 58%, or Rs 30,000 crore, of Tata Capital's loan book of Rs 52,000 crore, although personal loans make up only Rs 1,000 crore. Home loans constitute about 40% of retail loans, while loans against property make up 30% of the retail advances. Tata Capital currently sells 10% of its personal loans through the digital channels. In the next one year, it expects about 13% of the personal loans to be sold through the digital channel, said Veetika Deoras, COO, digital business.
Source: Economic Times