Indian banks, hoping to offset a slow recovery in corporate lending, are pushing into credit cards and personal loans, using blanket advertising, cold call campaigns and even sending employees to malls to lure customers.
Lending to companies has traditionally been the mainstay for banks in Asia's third-largest economy. But as India emerges from two years of slower economic growth, those loans are sour, large investment projects are stalled and company profits lacklustre. Meanwhile, retail borrowers have escaped largely unscathed, with income levels still growing, albeit at a slower pace, and no large-scale job losses.
The current push is the boldest since before the 2008 financial crisis, with some lenders aiming to increase loan books annually by a third or more, capitalising on Indians' growing appetite for luxuries like holidays abroad. And it is easy to see why, given the high margins and huge growth potential. India's 20 million credit cards - for a population of 1.3 billion - amount to just 0.5 percent of total outstanding bank credit. Unsecured personal loans make up just under 4 percent of all loans. While home loans continue to make up about half of consumer loans, Bali said there was an "increasing appetite" for credit cards and unsecured lending, with Kotak aiming for up to 35 percent and 45 percent growth, respectively.
Axis Bank Ltd has already increased the share of unsecured loans to 9 percent of its retail arm from 6 percent, retail lending head Jairam Sridharan said. He aims to increase that to 15 percent in three years. Housing loans, he says, are stable and less risky - but returns are also lower. "We'd like to balance that out," Sridharan said. RBL Bank, a small private sector lender, acquired RBS' Indian credit cards business in 2013 and is growing aggressively, using cards to lure in new clients.
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