Banks See Sharp Growth in Unsecured Loans Despite RBI Caution

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Leading banks like HDFC Bank, ICICI Bank, and Kotak Mahindra Bank significantly expanded their unsecured loan portfolios during the July-September quarter, as revealed by a Moneycontrol analysis of their financial reports. These banks anticipate continued growth in the unsecured loan segment, encompassing microfinance, credit cards, personal loans, and select retail loans, according to statements from bank officials.

This growth occurs amid concerns expressed by the Reserve Bank of India about the surge in unsecured loans and the need for enhanced monitoring mechanisms.

HDFC Bank, India’s largest private sector lender, reported a 15.5 percent increase in its personal loans, rising from Rs 1.54 lakh crore in the corresponding quarter the previous year to Rs 1.78 lakh crore.

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ICICI Bank’s personal loan portfolio witnessed remarkable growth of 40 percent, reaching Rs 1.04 lakh crore from Rs 74,355 crore. Their credit card portfolio also surged to Rs 43,230 crore during the July-September quarter, representing a 29.5 percent growth compared to the previous year.

Kotak Mahindra Bank’s unsecured loan portfolio expanded to Rs 38,311 crore during the July-September quarter, up from Rs 25,580 crore a year earlier, marking a substantial 49.76 percent increase.

IndusInd Bank observed a 16 percent growth in its microfinance portfolio, reaching Rs 34,363 crore in Q2 of FY24, up from Rs 29,617 crore the previous year. The bank’s credit card business experienced a 33 percent increase, reaching Rs 9,462 crore, and other retail loans surged by 64 percent to Rs 20,879 crore.

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RBL Bank’s retail portfolio, inclusive of credit cards and microfinance, stood at Rs 44,092 crore, compared to Rs 36,686 crore the previous year, reflecting a 35 percent increase.

Reserve Bank of India (RBI) Governor Shaktikanta Das has raised concerns about the rapid growth of unsecured lending by banks and recommended that they strengthen their internal surveillance mechanisms to mitigate potential risks.

HDFC Bank’s Chief Financial Officer, Srinivasan Vaidyanathan, expressed the bank’s intention to increase its portfolio by 15 to 20 percent in the upcoming quarters, citing a strong demand and a 15 percent year-on-year growth rate.

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ICICI Bank’s Chief Financial Officer, Anindya Banerjee, emphasized the bank’s focus on existing customers and cross-selling opportunities, particularly to customers with a favorable credit score.

Kotak Bank’s CFO, Jaimin Bhatt, affirmed the bank’s comfort with expanding its unsecured portfolio and targeting growth in the mid-teens.

IndusInd Bank’s Managing Director, Sumant Kathpalia, outlined their strategy to limit their credit card business and concentrate on other unsecured business exposure, aiming for a 5 percent share.

RBL Bank’s Managing Director, R Subramaniakumar, assured that there is no stress in their retail, microfinance, and credit card business, emphasizing their commitment to aggressive growth in these areas.

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