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Pandemic Stress on Unsecured Credit Assets via: HDFC Bank

HDFC Bank announced today that the increased stress on unsecured lending assets seen during the Covid-19 pandemic is over and the bank is now bullish on the segment.

The unsecured loan book for the bank includes credit cards and personal loans.

According to Parag Rao, Country Head for Consumer Finance at HDFC Bank, the next two years present an interesting opportunity to grow in what is otherwise seen as somewhat risky.

Rao acknowledged that his bank has also seen some rise in asset quality issues in the unsecured segment during the pandemic, and clarified that this has never reached worrying levels.

“A lot of the problems of the pandemic are gone,” he said, adding that customers who are now seeking credit are relatively better off from a risk perspective.

Bank lending grew 8.7% year-on-year on March 11, with retail lending continuing to post the strongest rise, data from the Reserve Bank of India (RBI) showed.

According to bankers, there is typically a greater need for credit in the last three months of a fiscal year as they attempt to meet year-end targets and borrowers exhaust existing credit limits. While non-food loans remained in the 5.4-7.2% range through November, they rose sharply to 9.3% in December and momentum continued over the next two months.

Outstanding non-food loans stood by 116.5 trillion on March 11, up 8.7% from the same period last year and up 0.7% from the two weeks ended February 25. The RBI publishes data on loans and deposits every 14 days. On an absolute basis, outstanding loans have increased by 79,482 crore between February 25th and March 11th.

Retail loans continued to grow faster than corporate loans, which were flat 31.8 trillion, up 12% from a year ago (as of Jan. 28), while credit to industry was at 30.5 trillion, up 6.4%. Sectoral credit data are usually available with a one-month lag.

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Richard Dement

The author Richard Dement