NewIndian banks push credit cards and personal loans to make up for slow corporate lending

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 per cent of total outstanding bank credit. Unsecured personal loans make up just under 4 per cent of all loans.

"For the industry as a whole, since a couple of years ago we’ve seen a slowdown in corporate (lending). So there is a genuine push towards the consumer lending space," said Sumit Bali, a senior executive vice president at Kotak Mahindra Bank Ltd.

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 per cent and 45 per cent growth, respectively.

Axis Bank has already increased the share of unsecured loans to 9 per cent of its retail arm from 6 per cent, retail lending head Jairam Sridharan said. He aims to increase that to 15 per cent in three years.