The recent boom in the unsecured retail loan segment is likely to be short-lived, says Piramal Capital and Housing Finance (Piramal Finance) managing director Jairam Sridharan.
“In the last two years, unsecured credit has increased a lot in retail as opposed to secured credit, and in terms of numbers, most of the credit that is happening in retail today, is unsecured,” he said.
“I do not think this will last. I think some of the larger ticket size secured businesses will emerge in a big way in the times to come. Let us just wait and watch how businesses like housing will turn.”
Broadly, the demand for home loans has weakened slightly in November-December even as the year-on-year growth remains strong.
“It is not the time to feel worried yet. However, it is true that momentum is a little bit lower now than a quarter or six months ago. Let us see how this stacks up,” Sridharan said on the sidelines of a press meet on Wednesday.
“It is possible that after a couple of years of real slow demand, customers had a lot of pent-up demand which got used up during Diwali season and now we are seeing a bit of a new normal. It is possible, but it is too early to call. Right now, I would not link this up with the interest rate environment or any of that stuff. I do not think it is correlated. It is more about individual circumstances,” he said.
On Wednesday, Piramal Finance launched its first brand campaign, aimed at addressing the credit needs of customers in tier two and tier three towns across India.
“With their tailor made product offerings in the form of home loans, business loans and personal loans and used car loans, Piramal Finance provides loans to customers by not only validating the formal credit history and papers/documents, but also evaluating customers on the basis of their intent and integrity – thereby highlighting the differentiated lending experience,” the company said in a press release.
As far as the underserved segment is concerned, the average ticket size of the company’s housing loans is around Rs 14-15 lakh. It is Rs 5 lakh in unsecured micro, small and medium-sized enterprises (MSME) loans, and around Rs 15-17 lakh in secured MSME loans. Around 70% of the loans to this customer base are secured in nature.
“If you look at the credit bureaus and if you look at the housing loan product, there is a very high GNPA ratio in housing loans with a ticket size of less than Rs 10 lakh. But if you look at Rs 10-25 lakh ticket size, the housing NPA ratios are quite low,” Sridharan said.
“I think it is a myth that this segment is very high risk. I do not think people are offered enough credit here. It is true that it takes a greater level of operating expense to serve this population and so you need to have the right processes and technology support to be able to serve this segment in a cost effective way. But from a pure GNPA ratio perspective, I am not worried,” he added.
Going ahead, the company expects its assets-under-management to hit Rs 1 trillion in the next three-to-four years. Within this, it expects the key developer finance portfolio to stand at around Rs 30,000-40,000 crore in the next three-four years.
Going ahead, the company expects retail loans to make up two-third of its overall loan book, with housing loans comprising 50% of the retail book.
The overall assets stood at Rs 63,780 crore as on September 30.