 "ICICI Bank")
The overall credit demand in the economy continues to remain in single digits. However, the private banks have managed to beat this trend and have been growing their advances in double digits fuelled by the unsecured lending within the retail segment.
Within the unsecured book (loan that is obtained without the use of property as guarantee for the loan) lenders have witnessed robust growth in both personal loan as well as credit cards.
For instance, ICICI Bank-country's largest private bank- said that its unsecured credit book grew by 43% year-on-year to Rs 16,693 crore and was about 3.7% of the overall loan book at the end of quarter ended June.
Lenders say the rise of credit bureaus and easy monitoring of credit scores have helped them check delinquencies.
"On the unsecured side, personal loans and credit cards, I think the way the credit bureau has evolved, that has given banks a lot more confidence to do lending there. So over the last two or three years, you have seen that growing as well," said Rakesh Jha, Chief Financial Officer,ICICI Bank in the analyst conference call.
Moreover, unlike 2008-09, the last time when we saw an increase in bad loans in this segment banks are sticking to their own customer base instead of sourcing it in the open market. This gives them an access to the customer's spending and income patterns and thus allows them to take a call more judiciously. For instance, Axis Bank, stated that 97% of the credit card and 78% of personal loan originations in the April-June quarter were from existing customers of the bank.
However, even though some lenders have begun to see some stress in this segment they still believe that the higher pricing of these loans factors in some of these slippages ensuring that the bank is adequately covered. For instance, HDFC Bank-one of the key players in the personal loans segment had admitted that it has seen some stress in the retail segment, specifically personal loans but it isn't worrisome.
"The risk-reward is playing off well in the unsecured segment and therefore we are not looking at moderating the growth in these segments," said Paresh Sukthankar, Deputy Managing Director, HDFC Bank.
At the end of quarter ended June, HDFC Bank's personal loan book surged by 41% YOY to Rs 41,059 crore and its credit card base grew by 26% to Rs 21,255 crore. The bank has introduced several innovative offerings such as personal loan within ten seconds that has also allowed it to grow its book.
Now, even the smaller private sector lenders are sharpening their focus on this segment to grow their retail book. However, most of these lenders do not give a break-up of their retail advances.
