Unsecured retail lending is rising in private banks and this could be dangerous

The retail loans of private banks such as HDFC and Axis Bank are increasing, thereby also raising the risk of defaults.

HDFC Bank’s personal loan book grew by 41 per cent at Rs 41,000 crore, and its credit card business grew by 26 per cent to Rs 21,000 crore.

"These products have an expected loss which is higher because you are pricing in a certain level of loss. As long as actual losses are within what you expect for those products, it's the cost of doing that business," Paresh Sukthankar, DMD, HDFC Bank, told ET.

Even Axis Bank’s unsecured lending portfolio grew and touched double digits. Its personal loan and credit card business added Rs 15,000 crore to its total retail loan portfolio.

The bank, which recorded retail NPAs upwards of Rs 300 crore, is not worried about growth in retail delinquencies.

"If you look at the scale at which we have grown, the retail book and scale at which delinquencies have grown is not a cause of concern," V Srinivasan, DMD, Axis Bank, told ET.

Kotak Mahindra Bank was also not behind in increasing its unsecured lendings and its small business, personal and credit card portfolio grew over 18 per cent compared with last year.

Kotak’s total portfolio stood at Rs 14,684 crore and as per a RBI data, total personal loans in the banking system grew at 19.1 per cent to over Rs 14.2 lakh crore.

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