Even as banks are focussing on cleaning up their consumer finance portfolios, the major private and foreign banks are displaying divergent approaches to the issue following the recent hike in key interest rates. While ICICI Bank has decided to discontinue two-wheeler finance at the dealer end to cut down on costs, rival HDFC Bank, the second largest two-wheeler financier, said on Thursday that not only was it not moving out its canvassers from the auto dealer outlets, the bank may even expand the network of such canvassers if the need arises.
Ashok Khanna, executive vice president and business head, auto loans, HDFC Bank told FE, ?Currently, we offer two wheeler loans at 23-24% interest rate through around 1,600 canvassers stationed at auto dealer showrooms across the country. We do not intend to discontinue the services of these canvassers and dealers to whom 1-4% incentive commission is being given. In fact, we may even increase this number.??
The bank?s two wheeler loan portfolio is currently worth around Rs 1,600 crore. And, the delinquencies in this portfolio are on the decline mainly due to the stringent customer vetting process put in practice by the bank, Khanna said.
Meanwhile, Hemant Kaul, president(retail banking), Axis Bank, said, till-date, the bank has not ventured into the business of financing two wheelers.
Currently, the bank offers only four wheeler auto loans. ?Our auto loans portfolio presently contributes around 25% share to our total retail credit portfolio that is currently worth Rs 15,000 crore,?? he said.
On the other hand, HSBC India has decided to go slow on its Pragati Finance personal loans business launched just last year, as well as other consumer areas but will not pull out of any sectors, according to Naina Lal Kidwai, group general manager and country head of the bank.
On the one hand, inflation and interest rates have gone up, making loans costlier for consumers and defaults a problem. On the other, she said, with general elections round the corner, many borrowers may try to get away without repaying.
?In consumer assets, we will not exit but we will not lend as aggressively either,? Kidwai said, pointing out that it is a new area for HSBC, so its exposure is not much.
Consumer assets are a small part of HSBC India?s overall business, so bad debts in the sector, around the industry average of 30%, have not yet begun hurting. HSBC had not entered it in a major way when it was alerted by danger signals in the market.
?It could have hurt us if it were bigger,? Kidwai said. ?In our case, it is not a case of exiting but it?s a case of reining in and we will go back into aggressively marketing it when we believe the environment is right.?
?People tend not to repay their loans. It?s an election year, too much is ranged in favour of the depositor,? she said. ?And as long as that mood remains, why should we commit hara kiri?,? she said.
HSBC?s main sector is Pragati Finance, which offered personal loans of up to Rs 50,000 without collateral to people who had limited access to bank finance.
Traditional players like Citifinancial, ICICI Bank and GE Money have already begun cutting down and cleaning up this end of the business.