Mumbai: Public sector banks in India have stepped up retail lending, outpacing the growth seen in this segment by their private sector peers, who have retreated in the backdrop of an uptick in delinquencies, particularly in unsecured loans.
Results for the June quarter show that the growth in retail loans of large public sector banks was almost double that of the private sector lenders. This was on the back of a larger customer pool, lower delinquencies and better pricing power due to higher proportion of retail deposits.
State Bank of India (SBI) recorded a 13% year-on-year growth in retail loans, maintaining its fast pace, while Bank of Baroda (BoB) and Punjab National Bank (PNB)--the two other large public sector banks--reported 18% and 12% y-o-y growth, respectively.
In comparison, ICICI Bank recorded 7% y-o-y growth while HDFC Bank and Axis Bank saw 8% and 6% growth, respectively.
Anand Dama, head of BFSI (banking, financial services and insurance) research at Emkay Global Financial services, told ET that private sector banks have pulled back a little from retail largely because of the higher delinquencies seen in the last fiscal, especially from unsecured segments like personal loans and credit cards, which form a bigger part of their retail loan book.
"For public sector banks, retail loans mostly include mortgages, vehicle and gold loans. So public sector banks are in a better position to grow their book," Dama said. "The fact that they are coming off a low base has also played a part. With the cost advantage they have with respect to loans, one may not be surprised if they accelerate this momentum." To be sure, private sector banks have a much larger retail loan book. For instance, Axis Bank has disbursed ₹6.22 lakh crore in retail loans compared with about ₹2.6 lakh crore for BoB and PNB.
SBI is the only public sector lender with a larger chunk under retail loans at ₹15.39 lakh crore.
Analysts said that the fact that HDFC Bank, the largest private sector lender, was also adjusting its loan book after merger with HDFC last year, may have played a part in the slowdown in retail sector loan growth. "Private sector banks have been selective even on the relatively safer mortgage loans because they do not want to sacrifice their margins after a point," Nitin Aggarwal, head of institutional equities at Motilal Oswal Financial Services, said. "Public sector banks are a little more comfortable on deposits. But as interest rates settle, banks like HDFC will up their game. In fact, HDFC's stated objective is to grow in line with the banking system this year and accelerate faster than the system next year, which means retail growth will pick up."
However, public sector banks led by SBI may also not be far behind. SBI chairman CS Setty said the bank is ready to grow its unsecured personal loan book, after keeping it stagnant last fiscal due to an improvement in credit profile. "We were a little cautious with the low net monthly income customers, particularly when we realised that some of them were also highly leveraged. But now we have seen that their credit profiles are also improving in terms of their net monthly income to EMI ratio," Setty said.
Results for the June quarter show that the growth in retail loans of large public sector banks was almost double that of the private sector lenders. This was on the back of a larger customer pool, lower delinquencies and better pricing power due to higher proportion of retail deposits.
State Bank of India (SBI) recorded a 13% year-on-year growth in retail loans, maintaining its fast pace, while Bank of Baroda (BoB) and Punjab National Bank (PNB)--the two other large public sector banks--reported 18% and 12% y-o-y growth, respectively.
In comparison, ICICI Bank recorded 7% y-o-y growth while HDFC Bank and Axis Bank saw 8% and 6% growth, respectively.
Anand Dama, head of BFSI (banking, financial services and insurance) research at Emkay Global Financial services, told ET that private sector banks have pulled back a little from retail largely because of the higher delinquencies seen in the last fiscal, especially from unsecured segments like personal loans and credit cards, which form a bigger part of their retail loan book.
"For public sector banks, retail loans mostly include mortgages, vehicle and gold loans. So public sector banks are in a better position to grow their book," Dama said. "The fact that they are coming off a low base has also played a part. With the cost advantage they have with respect to loans, one may not be surprised if they accelerate this momentum." To be sure, private sector banks have a much larger retail loan book. For instance, Axis Bank has disbursed ₹6.22 lakh crore in retail loans compared with about ₹2.6 lakh crore for BoB and PNB.
SBI is the only public sector lender with a larger chunk under retail loans at ₹15.39 lakh crore.
Analysts said that the fact that HDFC Bank, the largest private sector lender, was also adjusting its loan book after merger with HDFC last year, may have played a part in the slowdown in retail sector loan growth. "Private sector banks have been selective even on the relatively safer mortgage loans because they do not want to sacrifice their margins after a point," Nitin Aggarwal, head of institutional equities at Motilal Oswal Financial Services, said. "Public sector banks are a little more comfortable on deposits. But as interest rates settle, banks like HDFC will up their game. In fact, HDFC's stated objective is to grow in line with the banking system this year and accelerate faster than the system next year, which means retail growth will pick up."
However, public sector banks led by SBI may also not be far behind. SBI chairman CS Setty said the bank is ready to grow its unsecured personal loan book, after keeping it stagnant last fiscal due to an improvement in credit profile. "We were a little cautious with the low net monthly income customers, particularly when we realised that some of them were also highly leveraged. But now we have seen that their credit profiles are also improving in terms of their net monthly income to EMI ratio," Setty said.
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