The better asset quality is encouraging all big banks such as State Bank of India (SBI), HDFC Bank, ICICI Bank and Axis Bank to grow their retail advances faster than any other segment.
When India Inc is giving a heartburn to banks with a steady increase of bad loans, retail customers are repaying loans on time. This has resulted in bad loans in retail segment touching historical lows.
According to Credit Information Bureau (India), the country's leading credit information company, retail NPAs have dipped to their historical lows with deliquencies on home loans and other retail loans showing a significant fall.
The delinquency in the home loans dropped to 0.5% of total advances at the end of December 31, 2014, down from 1.06% at the end of 2010. Defaults on the unsecured portfolios such as credit cards were also down to 1.19% from a peak of 3.27%, while defaults on the personal loans dropped to 1.01% from a peak of 2.65% of total advances earlier.
The better asset quality is encouraging all big banks such as State Bank of India (SBI), HDFC Bank, ICICI Bank and Axis Bank to grow their retail advances faster than any other segment. Other public sector banks and smaller private sector banks have also been focusing on retail loans for a while.
Last fiscal, the bank credit saw a growth of 12.6%, an 18-year low. It increased to Rs 70.4 lakh crore from Rs 62.5 lakh crore reported in April 2014. The bank credit growth was sagging at 9% all through the financial year 2014-15, but in the fourth quarter, the telecom auctions helped banks beef up their advances.
SBI, which has the largest retail book at Rs 2,60,226 crore, is yet to announce its fourth quarter results. But for the nine month period ended December 31, 2014, the bank reported a 13-15% growth in its retail advances.
Chanda Kochhar, CEO and MD, ICICI Bank, said in a media concall after announcing the fourth quarter results, "On the retail side, our focus has been on secured assets. So, mortgages and auto loans drive the growth. The growth in home loans has been over 26% and that in the auto loans, more than 24%. We have seen some growth on personal loans and credit cards."
ICICI Bank reported a retail growth of 24.6% with the total home loans growing at the fastest pace at 26.17% over the previous year with total outstanding at Rs 8,91,048 crore, vehicle loans at Rs 29,592 crore, credit cards at Rs 3,945 crore and personal loans at Rs 6,904 crore.
HDFC Bank, the largest issuer of credit cards in the country, saw its retail advances grow by 15.47% to Rs 1,72,842 crore at the end of March 2015. Despite a larger unsecured advances, the bank has very low levels of bad loans on its the retail book. The bank, which has about 57.48 crore cards in circulation and Rs 25,820 crore worth of personal loans, has lower delinquencies than the industry average on its retail book.
Harshala Chandorkar, senior vice president, Cibil (Credit Information Bureau India Limited), said, "Banks are using the data from the credit information bureau to take care of their portfolio, resulting in delinquencies on retail portfolios to reach historical lows."
For Axis Bank, retail loan risk continues to be at a low. "Tighter underwriting practices, greater use of bureau data and lower consumer leverage are all responsible for this. But risk does tend to be cyclical, so we remain vigilant," Jayaram Sridhar, president - retail lending, Axis Bank.
Axis Bank's retail book stands at Rs 1,11,932 crore, growing by 27% over the previous year. The home loan of the book of the bank was at Rs 53,727 crore growing by 20.54%, the personal loans of the bank were at Rs 10,073.88 crore and the auto loans, at Rs 8,954.56 crore.
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