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The common man is gaining a celebrity status in banking circles, as the deteriorating health of corporate loans continues to wipe out a sizable chunk of banks’ profits. The lenders are not only growing their home and automobile loan portfolios but are equally aggressive in expanding unsecured retail assets.
ICICI Bank’s unsecured personal loan and credit card portfolio increased by 59.1 per cent from a year earlier to Rs 6,225 crore at the end of December 2013. The growth in the lender’s retail advances during this period was 22.3 per cent. The private bank’s mortgage and auto finance portfolios were up 23 per cent and 35 per cent, respectively, on a year-on-year basis at the end of the quarter.
The private lender was one of many that had slowed unsecured retail lending following the crisis in the financial sector in 2008-09. Unsecured consumer credit such as personal loans and credit cards are perceived as high-risk assets, especially when the economy is not doing well. Many banks had suffered losses during the past crisis due to a high delinquency rate in these loans.
ICICI still maintains it is cautious in offering these loans. “The unsecured credit card and personal loan portfolio continued to remain a small portion, about 1.9 per cent of the overall loan book though the growth rate is high due to the low base,” N S Kannan, executive director of the bank, told analysts in a recent interaction.
While low base could be one reason for high growth in unsecured retail loans, bankers say that limited job losses, improving consumer credit behaviour and available data on credit history of customers are encouraging them to grow this business rapidly once again.
Also, lenders are now adopting a strategy to offer unsecured loans only to customers who have previously banked with them.
HDFC Bank, the largest issuer of credit cards in the country, aims to offer one million credit cards in 2014.
The bank’s credit card and personal loan portfolios have grown 17 per cent and 19.5 per cent, respectively, on a year-on-year basis at the end of October-December 2013 quarter compared to 13.6 per cent rise in its total retail advances.
“We have a strong risk management system, our data mining is robust and we mostly offer credit cards to customers with whom we have already established a banking relationship. Our delinquency rate in the credit card business is one of the lowest in the industry,” Parag Rao, senior executive vice-president and the business head of card payment products and merchant acquiring services at HDFC Bank, told Business Standard last month.
Axis Bank has also reported higher growth in unsecured retail loans with its personal loan portfolio rising 52.5 per cent on a year-on-year basis. The private lender’s domestic retail assets grew by 33 per cent at the end of December 2013.
ICICI Bank:
- Year-on-year growth in credit card and personal loans: 59.1%
- Year-on-year growth in retail advances: 22.3%
- Year-on-year growth in home loans: 23%
- Year-on-year growth in auto loans: 35%
- Year-on-year growth in credit card: 17%
- Year-on-year growth in personal loans: 19.5%
- Year-on-year growth in retail advances: 13.6%
Source: Banks
