ICICI makes aggressive push in unsecured loans

ICICI Bank, the country's largest private sector lender, has been aggressive on unsecured lending, especially personal loans. (An unsecured loan is one that is obtained without the use of property as guarantee for the loan. Borrowers generally must have high credit ratings to be approved for an unsecured loan. Personal loans (in spite of their high interest rates) are probably the best way to go for individuals looking to borrow relatively small amounts of money, and who are able to repay the loan within a couple of years.)

ICICI Bank’s personal loan book grew 61 per cent year-on-year in June 2014-2015. In this period, credit cards grew 18 per cent, home loans 26 per cent and automobile loans 21 per cent. In an analysts' conference call after the quarter ended June, the bank had said the credit card and personal loan portfolio was Rs 11,682 crore and only 2.9 per cent of the overall loan book. And, that the growth was high due to the low base. The bank maintains 70 per cent of the incremental unsecured lending to existing customers.

"Delinquency levels indicating no signs of stress in the retail portfolio," ICICI Bank said. (Delinquency is a failure to pay a debt by the due date.)

ICICI Bank said there had been substantial improvement in the credit infrastructure, with established credit bureaus and existing database.

ICICI Bank had renewed focus on unsecured lending in the past three years. In 2008-12, it had started shrinking its retail book on account of rising bad loans in the unsecured lending segment. In March 2007, the retail loan book was 65 per cent of the total. This had come down to 35.5 per cent in March 2012.

ICICI Bank then started expanding the retail book. It became 42 per cent in March 2015. The bank said there had been a 20 per cent compound annual growth rate in retail loans since March 2012. Compound annual growth rate is the mean annual growth rate.

It had said to grow the retail banking business at a pace faster than the market one, it would also be leveraging its marketing and technology strengths.

"ICICI Bank has been growing its retail portfolio and also its unsecured lending part. There is no cause of alarm because they have been growing it cautiously and not going at it blindly," said an analyst at a foreign brokerage house.

Between June this year and in 2014, HDFC Bank saw 34 per cent growth in its personal loan portfolio. Axis, Kotak Mahindra and Federal Bank do not give a break-up of the retail loan book.