Relying on unsecured products to drive profitability is risky: Analysts

While retail NPAs aren't a threat just yet, analysts advise investors to be cautious on this segment

A cursory reading of the Reserve Bank of India’s (RBI’s) loan growth data for January 2019 appears strong and positive. With 13 per cent year-on-year system growth and green shoots in lending towards industries (up 5 per cent), this appears to be a better period in recent times.

But below the surface, problems remain. While the segment continued to grow at 17 per cent year-on-year in January 2019, mirroring the trend in the past 5-6 months, the growing relevance of unsecured loans was unhealthy. 

Analysts at Kotak Institutional Equities note that frontline banks are focusing more on unsecured products to drive profitability