Kotak Mahindra Bank to acquire personal loan book of Standard Chartered

Kotak Mahindra Bank has announced its acquisition of Standard Chartered Bank's personal loan business in India. This strategic move allows Standard Chartered to focus on its wealth and investment banking services in the country. 

As of September 30, Standard Chartered's personal loan book in India had an outstanding balance of Rs 4,100 crore ($488 million). The personal loan market in India has become highly competitive due to strong consumer demand. To address concerns of increasing risk, the central bank has required lenders to allocate more capital for personal loans.

This has led to a moderation in banks' outstanding personal loans, to about 17% on-year in August from 18.3% a year ago.
"India's unsecured lending market offers significant growth potential for Kotak, especially in the higher-end segment," said Ambuj Chandna, head-products, consumer bank at Kotak Mahindra Bank.

The recommended transaction includes standard loans, which are loans that are currently performing well without any signs of distress or default, as per the guidelines of the Reserve Bank of India (RBI). 

Kotak Mahindra Bank stated that the transaction is anticipated to be finalised within the next three months, pending regulatory approvals and other closing conditions. Its goal is to utilise its technological proficiency and dedication to top-notch customer service in order to facilitate a smooth transfer for current customers of Standard Chartered Bank who have personal loans.

"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 added that India continues to be a key market for StanChart's network and the lender will continue to invest and grow in the country.

Kotak Mahindra Bank Ltd is set to release its quarterly financial results for the July-September period on Saturday, October 19. Analysts anticipate subdued growth in net interest income (NII) and net profit for the September quarter. NII is projected to be in the range of Rs 6,850 to Rs 7,150 crore, marking a 10-12% annual increase but remaining flat compared to the previous quarter.

Standalone net profit is expected to show a YoY growth of over 10%, reaching Rs 3,375 to Rs 3,560 crore. However, this figure is significantly lower than the previous quarter's net profit of Rs 6,250 crore. Experts believe that higher operating expenses and lower other income will impact the bank's bottom line.