Piramal Finance plans to diversify lending portfolio – Banking & Finance News

Piramal Finance is planning to enter the gold loan and co-branded credit card segments as part of its strategy to build a diversified lending portfolio. The non-banking financial company (NBFC) expects the share of housing loans and loans against property (LAP) to decrease from 70% of its current retail assets under management (AUM) to 60% over the next three to four years as it looks to increase the share of used car finance, personal loan and business loans, Jairam Sridharan, MD, Piramal Finance, told FE.

“We do not have gold loan business right now. However it is a segment we are interested in,” Sridharan said, adding that the intent is to get into the business in the coming quarters.

The plan to enter into the gold loan business comes at a time when the Reserve Bank of India (RBI) has expressed concerns about violation of guidelines by some players. The banking regulator, on Monday, said it found several irregular practices in the gold loan industry and asked lenders to fix the lapses within three months and report back in order to avoid supervisory action.

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Piramal Finance says it will ensure that it meets all the regulatory guidelines prescribed by the regulator. “Regulatory oversight is quite high (in the gold loan segment). We need to make sure that we have the right governance structure and other requirements in place before we enter into this business. We will take our time,” said Sridharan.

The concerns raised by the RBI are absolutely valid. A large part of the industry and many regulated players do follow the guidelines, he added. Driven by the sharp growth in gold loan financing, several lenders have sharpened their focus on loan against jewellery. Gold loan outstanding has surged 40% to Rs 1.32 lakh crore as of July end from Rs 95,344 crore a year ago, showed RBI data.

The company will also launch co-branded credit cards, which will be targeted towards salaried customers. With entry into new segments, the share of housing and loan against property will come down.

As of June end, the company’s retail AUM stood at Rs 50,530 crore, with housing loans accounting for around 45% and LAP making up 25%. “The share of housing loan plus loan against property will probably come down to closer to 60% in the 3-4 years, from 70 % currently. We will have more used car finance, gold finance, unsecured credit, business loans,” he said.

“Our intent is to build a diversified lending business. To achieve this, we have introduced new business segments and we will continue to launch a few more,” said Sridharan. We are not planning to enter new car financing segment as our target customers usually buy used cars, he added.