Private banks have maintained their momentum in expanding personal loan portfolios during the September-December quarter, even in the aftermath of the Reserve Bank of India (RBI) raising risk weights for unsecured loans. Quarterly reports from these banks indicate a year-on-year increase in personal loan books ranging from 10% to 86%.
Despite this growth, bankers highlight that the surge in lending is not concentrated in the low-ticket segment (below Rs 50,000), where the risk is perceived to be comparatively higher. Banks assert that their focus is on extending loans to existing customers with a robust credit history, rather than significant involvement in the riskier low-ticket segment.
In a post-earning call, Anindya Banerjee, Group Chief Financial Officer at ICICI Bank, noted measures taken to refine credit parameters for unsecured loans. These include analyzing cohorts contributing more to delinquencies and adjusting origination in specific segments. Additionally, the bank has rationalized sourcing payouts and adjusted pricing on personal loans to curb excessive growth.
Sumit Bali, Group Executive and Head of Retail Lending at Axis Bank, explained that the growth in personal loans is a result of ongoing transformation projects, emphasizing that quality remains a top priority. He mentioned that 80% of their customers in this segment are existing bank customers.
Despite the RBI's move to increase risk weights on unsecured loans in November, concerned about the surge in personal loans, experts predict that banks will continue to invest in personal loans due to their high margins compared to other secured loans. Ajit Kabi, a Research Analyst at LKP Securities, emphasized that the appeal of high-yield loans is likely to drive banks to continue unsecured lending despite increased regulatory measures.
