Mumbai: Kotak Mahindra Bank Ltd on Tuesday said it has bought Rs.700 crore of unsecured loans to small businesses from Barclays Bank Plc’s Indian unit that will give it access to 6,000 new customers.
The acquisition is aimed at growing the bank’s loan book in “chosen client segments”, said Paul Parambi, head, group strategy, at Kotak. “They are good loans and these 6,000 customers will give us access to other entities linked to the business as well as to new promoter clients.”
For Barclays, the latest sale is yet another attempt to reduce its exposure in India as it shifts focus to corporate and investment banking while reducing retail exposure in the country.
The British bank confirmed the sale in a statement. “Our growth in India is focused on our competitive strengths providing services to multinationals and large corporates, utilizing our offerings in international banking such as cash management and trade finance, as well as providing wealth management and investment banking services,” Barclays said in the statement.
Parambi said these loans are “seasoned performing loans” from Barclays with an average ticket size of just above Rs.10 lakh. “The average maturity for these loans is three years and it was a good opportunity for us considering that we have a high capital adequacy ratio,” he said.
At 15.6% capital adequacy, Kotak is comfortably above the Reserve Bank of India’s (RBI’s) mandatory 9% requirement and Parambi said the bank has “an appetite for further acquisitions, which can strategically create value and will actively seek such opportunities”.
Barclays has been winding down its loan book for the past couple of years. In December 2011, it sold its credit card business to Standard Chartered Plc and Kotak Mahindra Bank.
It has closed all its 40 automated teller machines in the country and its employee strength was down to 610 in March 2012 from 2,078 in 2007-08, according to the latest data available on RBI’s website.
The portfolio is too small to have any material impact on Kotak, according to Kajal Gandhi, assistant vice-president at icicidirect.com, the retail broking arm of ICICI Securities Ltd. “It makes little impact on their Rs.50,000 crore loan book but it gives them a book which is not as risky as retail loans but also does not require high exposure like loans to companies. They are banks that also buy non-performing loans from other banks and I am sure they must have done their due diligence on these loans as well,” Gandhi said.
Kotak Mahindra’s total loan book increased 26% to Rs.50,245 crore in December 2012 from Rs.39,772 crore in December 2011. Loans to small businesses and agriculture rose 28% to Rs.22,919 crore in the quarter ended December 2012.
“Business loans are an important element in our segmented offering. This acquisition also gives us a very good set of customers who can be offered our entire suite of banking products,” Parambi said.
Kotak shares rose 0.61% to Rs.678.15 on BSE; the benchmark Sensex index shed 0.46% to 19,659.82 points.