The growth in the retail loan book of private banks remains robust even as lending rates remain high and overall credit growth in the system shows weakness. With the exception of ICICI Bank, major private banks HDFC Bank, Axis Bank, Kotak Mahindra Bank and IndusInd Bank, saw retail loans grow in the 30-50% yoy range in all four quarters of financial year 2011-12.
This trend continues in the April-June quarter with private lenders HDFC Bank and IndusInd Bank as well as mortgage lender HDFC reporting retail loan growth of 33%, 46% and 29% respectively. This is faster than the growth in the corporate loan book for these lenders.
However, for the system as a whole retail credit grew slower at 12% to R7.7 lakh crore in 2011-12. Public sector lenders like State Bank of India, Bank of Baroda, Punjab National Bank and Union Bank that account for the majority of lending in the country grew their retail loan books at at between 1-11% in 2011-12. SBI has the largest retail loan book in the country of R1.8 lakh crore at the end of 2011-12. Keki Mistry, vice-chairman and CEO of HDFC, said that barring Mumbai, where home prices are very high, demand for home loans remains robust. Home loans constitute about 50% of the retail credit disbursed in the country. The other major segments in the retail pie include vehicle loans, education loans, consumer durable loans, credit cards and loans against deposits.
SV Parthasarathy, the head of Consumer Finance at IndusInd Bank, said that focused lending through attractive offers and better customer experience has helped private banks to attract borrowers even in difficult economic conditions.
HDFC Bank, with its large branch network in metros and non-metros, has emerged as the market leader in retail sub-segments like credit cards and auto loans. HDFC Bank benefited from ICICI Bank?s decision to become more cautious in the retail segment since 2008-09 after rising delinquencies in its unsecured loan portfolio. The retail loan book of HDFC Bank now stands at over R1.11 lakh crore.
Axis Bank?s 2011-12 annual report states that it plans to increase focus on retail loans. It plans to increase the proportion of retail loans to 30% from around 21% through a greater push on home loans, auto loans and credit cards. This is being done to de-risk itself from over-reliance on corporate lending which has slowed down in recent times and reported rising cases of bad loans and restructured debts.
YES Bank, which has a relatively small retail loan book, has also launched a slew of retail products in retail credit. Bank officials say that retail loans offer better yields than corporate loans and helps improve profitability.
Retail credit is still under-penetrated in India at 8.3% of GDP, mainly because it is a difficult business to build and has a long gestation period.