Indian Overseas Bank (IOB) is planning to launch a separate wealth management vertical as early as the next financial year, joining a growing number of public and private sector lenders seeking to expand their product offerings and boost fee income.
“We are working on it. Maybe at the beginning of the next financial year we will be launching it,” Ajay Kumar Srivastava, MD & CEO of Indian Overseas Bank, told FE, when asked about the lender’s plan for wealth management.
The lender is exploring both inorganic opportunities and joint ventures, he said, declining to share further details. “We are at a very advanced stage of discussion. Maybe by next quarter, we will be able to tell you some more details,” Srivastava said.
Several public and private sector banks recently announced plans to enter the wealth management business. Private sector lender Federal Bank launched a wealth management platform earlier this year. RBL Bank, backed by Emirates NBD, is reportedly evaluating an entry into the broking and asset management businesses. Punjab National Bank, the country’s third-largest public sector lender, also plans to launch wealth management services by December to increase its non-interest income.
Closer to home, IOB’s cross-city peer Indian Bank has announced plans to enter the life insurance and wealth management businesses through separate joint venture subsidiaries. Indian Bank MD & CEO Binod Kumar told FE that the lender wants to offer wealth management solutions to existing customers who currently turn to other banks for such services. “It will also increase customer stickiness and expand our overall portfolio and income,” he said.
Indian Bank is still in the process of obtaining the necessary approvals. “I do not see this happening before one-and-a-half to two years,” Kumar said.
IOB, however, does not plan have any plan to float any insurance entity, Srivastava said. “It’s wealth management only. For insurance it will only be onboarding of new partners and not more than that,” he said.
IOB’s total business, comprising advances and deposits, grew 22% to ₹7.53 lakh crore as of September. Srivastava said the lender expects its total business to cross ₹10 lakh crore over the next two years.
On expected provisions under the expected credit loss (ECL) framework, Srivastava said IOB would require ₹3,200-3,300 crore by the end of March. “And as on today’s calculation, requirement is around ₹2,600 crore,” he said.
The bank is also creating an additional provision of ₹500-600 crore to cushion potential mark-to-market losses on its held-to-maturity investments under RBI guidelines. “We are going to create ₹500-600 crore of additional provision over and above the actual requirement. I don’t think we will be having any issue as far as ECL implementation is concerned,” he said.
