The country’s largest private sector lender, HDFC Bank, said on Wednesday that the high pressure on unsecured lending assets seen during the COVID-19 pandemic was over, and the bank is now optimistic about this segment.
The bank’s unsecured loan portfolio includes credit cards and personal loans.
According to HDFC Bank’s country head of consumer finance, Parag Rao, the next two years present an attractive opportunity for growth in the segment, which is otherwise considered a bit risky.
Acknowledging that his bank has also witnessed some elevation in asset quality issues in the unsecured segment during the pandemic, Rao clarified that the same has never been at worrying levels.
“A lot of the problems of the pandemic are gone,” he said, adding that customers looking for loans are now relatively better off from a risk perspective.
The evolution of the global economy, where consumption is growing, makes it a “good phase”, and the bank sees it as a good time to develop in this segment over the next 18 to 24 months.
Speaking at the launch of a co-branded credit card in association with retailer Shoppers Stop, Rao said the bank aimed to increase the contribution of co-branded cards to its business in the medium term.
In terms of spending, it aims to almost double the share of co-branded cards to 30% over the next three years, from 15% currently. In terms of card count, the share of co-branded cards is expected to increase to over 35% from 12% currently, Rao said.
He said the bank is in talks with a number of players for partnerships, which include a multi-portfolio conglomerate, a telecommunications player and digital-only deals with a restaurant and local mobility player.
As the BNPL (Buy Now Pay Later) trend grows, notably fueled by fintechs, Rao said the digital-only credit card offering will be the same.
He said, however, that BNPL’s effectiveness for the bank will be limited to acquiring new customers and cannot be a tool for building a portfolio.
Rao explained that a two- to three-month loan product like BNPL, which is driven by consumers’ impulse-buying behavior, cannot be helpful in growing a book.
Currently, the bank has 16 million credit cards and is growing with the addition of about 5 lakh each month, Rao said, adding that it is on track to meet its stated targets at the time. the restart of credit card issuance after the lifting of the RBI. its regulatory ban.
He said it would take around 6-9 months for the numbers to reflect the gains he’s making, and said the internal data available to him suggests they’re close to hitting share targets. market in number of cards and expenditure.
On the deal between Axis Bank and Citi, in which the third-largest national lender takes over the US lender’s consumer business, Rao said it wouldn’t change much for HDFC Bank.
About the bank’s partnership with Shoppers Stop, Rao said his bank aims to sell 1 million cards over the next three years. The retailer has 9 million consumers who may be the potential users of the co-branded credit cards.
Launched in two variants, one of the cards comes with the annual charge of Rs 5,000 which also offers lots of freebies.