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Cholamandalam DBS slows down its consumer finance business |
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Chennai, October 14 Edition, 2008 |
Cholamandalam DBS Finance Ltd (CDFL) is an
NBFC and is in the business of vehicle
finance, personal loans, and home equity
loans (loans against property) and corporate
& mortgage finance. CDFL thru its subsidiary
DBS Cholamandalam Distribution Limited and
DBS Cholamandalam Securities Limited offers
wealth management and broking services
respectively. The total NBFC’s Assets under
management is over Rs. 7000 crores of which
Vehicle Finance alone accounts for over Rs.
3000 crores.
The economy, in general, and the financial
services industry in particular, have been
witnessing turbulence in the recent times.
This has impacted companies engaged in the
business of “consumer finance” across India
as consumers have found it more difficult to
making regular repayments of loans.
Cholamandalam DBS, which is primarily in the
business of “secured lending” i.e. loans
secured against an asset, e.g., “vehicle
finance”, “home equity loans”, etc.,
commenced operations in consumer finance two
years ago. Cholamandalam DBS has also been
impacted by these trends in the “consumer
finance” businesses. “Consumer finance”
refers to the business of providing
unsecured loans to borrowers to meet their
needs. Within consumer finance it operates
in two segments – prime personal loans and
branch based lending. The branch based
lending is typically a lending operation to
segments like neighborhood shopkeepers etc
and this business is confined to about 8% of
the total assets of the Company.
Within the personal loan segment, borrowers
in the branch based lending segment are
facing difficulties in making prompt and
regular repayments with the slowdown in the
economy. This has led to delinquencies
across the industry – and many leading banks
and financial services companies are taking
steps to discontinue the products and
minimize the potential losses from such
delinquencies. Cholamandalam DBS has already
put in place a series of measures to contain
the fall out of this. In the consumer
finance business, it has implemented
company-wide initiatives to control costs,
phase out or refine products and tighten
credit policies. Further, in the interest of
all stakeholders, the management has decided
to scale down the consumer finance business
and restructure the number of
branches/outlets. Management has also
decided to close down some branches in view
of rationalization and consolidation of
business. This will include closure of 50
branches in the branch based lending
business. As a result the company may be
constrained to part ways with the employees
in these branches. However, the company will
continue to grow its business from the
remaining, over, 200 branches.
It is pertinent to mention, that the company
is committed to invest and grow in the other
businesses such as Vehicle Finance, Home
Equity Loans, Corporate & Mortgage Finance,
Wealth Management and Broking. |
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