Private Banks Tighten Vigilance On Small Unsecured Loans

MUMBAI: Small loans may turn out to be a big worry for banks. Some lenders are seeing stress rise in small-ticket unsecured personal loans as borrowers with low incomes find it hard to repay dues. RBI has flagged concerns over an increase in unsecured loans.

While Yes Bank and Kotak Mahindra Bank said delinquencies are higher than last year, ICICI Bank has said that borrowers who are falling behind delinquencies are in the below Rs 50,000 segment where the bank does not have a significant presence.

“On the unsecured loans, we have seen slight deterioration. These are early days, but we do find that delinquency is on a rising trend. Compared to six months ago, we are seeing a larger part of the portfolio in the 30-plus days past due (category),” said Yes Bank MD & CEO Prashant Kumar. Kumar, who was addressing reporters after the bank’s Q2FY24 results, said that the bank has already taken the necessary steps to tighten underwriting policy. “When we reach a proper mix of the retail to total loan, I think we will need to lower the growth rate of retail,” he said. Yes bank reported a net profit of Rs 115 crore for Q2FY24 – an increase of 47% over the previous year.

Kotak Mahindra Bank MD & CEO Dipak Gupta said that delinquencies in the unsecured segment are higher than 12 months ago, but it is still lower than the pre-Covid days. He said that the build-up of risk could never be ruled out and the bank was growing its business and had its foot over both the accelerator and the brakes.

ICICI Bank executive director Sandeep Batra said the bank’s unsecured portfolio is not seeing any additional stress as the lender focuses on existing customers, mostly salaried employees with corporates and the public sector.

Batra said that the build-up of stress that analyst reports are referring to is on the low-ticket size with loans of Rs 50,000 and below, where affordability and repaying capacity are a constraint.

“As far as our bank is concerned, we do not have a meaningful exposure in this segment. We are monitoring this segment and continue to give loans within our threshold,” said Batra. ICICI Bank is also monitoring the jobs situation in its borrower group to identify any early signs of stress.

In the post-policy press conference, RBI governor Shaktikanta Das said, “Certain components of personal loans are, however, recording very high growth. These are being closely monitored by RBI for any signs of incipient stress.”

RBL Bank, another private lender that announced its results on Saturday, said it had decided to make Rs 220-crore contingent provisions on unsecured loans and its credit card portfolio.

The bank has also decided to make full provisions for credit card defaults at the end of 120 days past due as against 180 days earlier. RBL Bank MD & CEO R Subramaniakumar said there is no increase in delinquencies and that the portfolio is performing well.

Source: The Times of India

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