Sustainable Financing
- IndusInd Bank, as a socially and environmentally responsible organisation
Banking for a Sustainable Livelihood
IndusInd Bank, as a socially and environmentally responsible organisation, seeks to specialise the lending portfolio by increasing investments in sectors like Financial Inclusion, Rural Banking, Microfinance, Livelihood Financing, Priority Sector Lending, Impact Investing and Consumer Finance and thus contribute positively to the nation’s developmental transformation in a sustainable manner.
IndusInd Bank believes that financial inclusion is not simply about access. It is about encouraging repeated usage of financial access. Our objective of financial inclusion is building an eco-system of financial services to address the issue of income generation, overall savings and improved standard of living. Our approach is to convert need into potential demand for financial services through capacity building and financial literacy.
IndusInd Bank’s rural banking vertical caters to the ‘bottom of the pyramid’ (BoP) segment through various product and service offerings such as microloans, vehicle loans, savings accounts and asset securitization to rural customers, while also engaging in term-lending to microfinance institutions. Our rural banking model promotes inclusivity by creating and developing opportunities for sustainable livelihood among underprivileged and economically disadvantaged groups.
At IndusInd Bank, we believe in building partnership with microfinance institutions (MFIs) through our flagship business correspondent (BC) model, for transforming the underprivileged in low-income groups and creating an environment for them to flourish. Our engagement with the BC partners is intensive, with minimal disruption at the field and minimal changes to the process of the BC. The credit and liability products are designed to reach out to the financially excluded segment of the population.
Livelihood financing is one of the core areas in our strategy wherein the focus remains on creating sustainable livelihoods, especially for the Bottom of the pyramid (BoP) section of society. Our objective is to create meaningful value for this section of the society thereby giving them an opportunity to lead life with dignity. We have channelled our efforts to commit more than 50% of our portfolio, dedicated to creating sustainable livelihoods, driven by financial inclusion activities like microfinance, vehicle finance and agricultural finance.
To encourage entrepreneurs among the weaker section of the society including women, IndusInd Bank’s Consumer Finance Division (CFD) supports the BoP customers categorized under PSL, including SMEs and small road transport operations with loans. The bank extends funding for a range of new and used assets including commercial and utility vehicles, goods carriers, passenger cars, two-wheelers, equipment for agriculture and construction purposes such as tractor and cranes.
Priority sector lending is an important instrument at the disposal of financial institutions to help channelize credit at preferential rates and resources to weaker and vulnerable sectors of the economy that may not get timely or adequate credit in the absence of such special disbursements. The objective is to ensure that these sectors, with high employment potential, get the requisite opportunity and move towards poverty alleviation. To address the demands of various niche areas, the Bank’s PSL portfolio is sourced from various business divisions from corporate, commercial and consumer banking groups. The Bank identifies potential high-credit areas like microenterprises and agri-allied sectors and sets up defined processes to achieve the stipulated targets for these segments.
IndusInd Bank has a dedicated Impact Investing Group that caters to small and medium enterprises in development-aligned sectors. To ensure effective capital deployment, the Bank has developed a proprietary impact-screening tool to identify the development potential in each investment and post-investment impact monitoring mechanisms that capture primary, secondary and tertiary impact data. As a strategy to utilize the complete potential of this portfolio, the Bank partners with various development agencies, social enterprises and government bodies working in the areas of socio-economic development.
In keeping with our development priorities, we have prioritized the development of the entire value chain for agribusinesses, from fields to markets. We also have an in-depth knowledge of the key elements shaping the industry – from an understanding of grass-root issues, such as the susceptibility of production to weather conditions, right up to sophisticated knowledge of the commodities market. IndusInd Bank is projected to increase its strategic investments in agribusiness by improving access to quality farming equipment, through our tractor financing programs; supporting agricultural infrastructure lending for cold supply chains and warehousing; providing corporate-linked agricultural finance, such as working capital loans; or financing rural roads and infrastructure projects to facilitate logistics.
Banking for a Sustainable Future
In an emerging economy like India, sectors like healthcare, education, renewable energy and national infrastructure are poised for tremendous boom, therein offering numerous growth opportunities to financial institutions such as banks. Apart from the significant market potential, IndusInd Bank, as a socially and environmentally responsible organization, seeks to specialize the lending portfolio by increasing investments in these sectors and contribute positively to the nation’s developmental transformation in a sustainable manner.
On account of the growing focus of the government on the housing sector with various initiatives and schemes, viz. PMAY, REITs, etc., real estate has emerged as one of the promising sectors for allied business, including financing. Considering the opportunities it offers, IndusInd Bank had set up a Real Estate Vertical within Wholesale Banking to provide holistic funding solutions along with the Investment Banking offerings of the Bank, to prominent players in the sector by having a team of seasoned real-estate professionals, based in key micro markets and extending diligence process by having an ear to the ground. Over these years, IndusInd Bank has created a diversified mix of residential and commercial portfolio of various products, well distributed among credible developers across pre-identified key micro markets.
IndusInd Bank is geared up to finance renewable energy projects in India as a means to contribute towards national agenda of installing at least 9% of generation capacity through wind and solar energy – a commitment within India’s Intended Nationally Determined Contributions (INDC) towards the Paris Climate Change Agreement.
Swatch Bharat Abhiyaan and National Health Protection Scheme, are just some of the plethora of government initiatives aimed to build a robust social healthcare infrastructure. Foreseeing the shift in the focus of the government towards healthcare penetration (qualitatively and quantitatively) and building a sustainable social infrastructure model, IndusInd Bank has formed a dedicated and focused healthcare delivery team, which, within a short span of time, gained good traction in terms of asset building and generating income for the Bank and covered the entire healthcare value chain from growing medical equipment manufacturers to large established hospital chains, from promoter-driven single vintage hospital to private equity backed young hospital chains.
Supply chain finance (SCF) handles both dealer and vendor finance of major manufacturer’s supply chain. We offer customized programs to suppliers/dealers as per the requirement of corporates. A robust internal control mechanism and portfolio monitoring tools have kept the portfolios healthy with negligible delinquency. Dedicated business, product, credit teams and an exclusive SCF operations team are handling this business, with a deep understanding of business nuances.
The education sector comprises of schools, universities, colleges, coaching institutes, education assets-owning companies and fund houses. There is a huge opportunity in the education sector in India due to the large population and low enrolment ratios. The major reasons for the increasing investment in the sector are steady cash flows, recession-proof nature of the business and negative working capital requirements. IndusInd Bank is lending to players in this segment with credibility and a good track. Strong monitoring mechanisms – like periodical cash flow monitoring, reconciliation of cash flow routing with the actual number of students on rolls, comparison with projected admissions, etc. – are in place, which has helped build good portfolio quality.