Personal lending director Sumit Bali said the proportion of unsecured loans will rise to 22% to 24% in the near future as the bank increases its focus on credit cards, personal loans and small business loans.
“The effects of Covid have now subsided and risk appetite is returning. We plan to gradually increase our exposure to unsecured short-term loans,” Bali said.
Retail loans of â¹ 3.5 lakh crore account for 56% of the bank’s net loans, 80% of which was secured at the end of September 2021. Bali said that ratio will go down as the bank tries to improve profitability.
Secured loans are led by home loans, auto loans, and collateral-linked loans to small businesses, and Loans Against Real Estate (LAP). Bali said the bank’s risk management and underwriting skills are now tried and tested, allowing it to tap into riskier segments of credit.
Unsecured loans usually have higher margins. For example, personal loans have a 7 to 8 percentage point higher margin than the 1 to 1.25% margin for home loans, while unsecured small business loans could be 9 to 10 percentage points higher, Bali said.
Home loans make up 37% of the bank’s retail loans, followed by land, auto, personal loans, and LAP.
Axis also offers the self-employed a business installment loan with a ticket size of less than â¹ 10 lakh. Bali said it expects credit demand from this segment when economic activity picks up. “The pandemic has changed consumer attitudes to buying. Although some segments such as travel or restaurants are affected, we see positive indicators in terms of retail spending supported by the hybrid work model.”
At the end of September, Axis had an 8.5% share of credit card spending, led by retailers. It relies on partnerships with companies like Flipkart to increase emissions and spend.
The bank is also in the running for Citibank’s retail franchise in India, which launched in April. “Everyone knows that we are one of the bidders. It is a mix of retail assets, liabilities and wealth management that are good segments and we are interested,” said Bali.