Head of retail lending Sumit Bali said that the proportion of unsecured loans will increase to 22%-24% in the near future as the bank increases its focus on credit cards, personal loans and small business loans.
“The impact of Covid has now diminished and risk appetite is back. We plan to gradually increase our exposure to unsecured low-holding loans,” Bali said.
Retail loans of Rs 3.5 crore make up 56% of the bank’s net advances of which 80% were secured at the end of September 2021. Bali said this percentage will decrease as the bank looks to improve profitability.
Secured loans are led by home loans, auto loans, small business guarantee-linked loans, and loans-for-property (LAP) loans. Bali said the bank’s risk management and underwriting capabilities are now being tried and tested, allowing it to enter the riskier loan sectors.
Unsecured loans usually come with higher profit margins. Bali said personal loans, for example, have profit margins 7 to 8 percentage points higher than the 1% to 1.25% margin over home loans, while for unsecured loans to small businesses, it can be 9-10 percentage points higher.
Home loans make up 37% of the bank’s retail loans followed by rural loans, auto loans, personal loans, and LAP loans.
Axis also offers a business loan in installments of less than £10,000 for the self-employed. Bali said he expects demand for loans from this sector as economic activity picks up. “The pandemic has changed the spending mindset of customers. Although some sectors such as travel or restaurants have been affected, we are seeing positive indicators in terms of retail spending with the help of the hybrid business model.”
Axis had 8.5% of retail-led credit card spending at the end of September. It relies on partnerships with the likes of Flipkart to ramp up issuance and spending.
The bank is also in the race to buy Citibank’s retail franchise in India, which was frozen in April. “It is well known to everyone that we are one of the bidders. It is a mix of retail assets, liabilities and wealth management which are good sectors to participate in and we are interested,” Bali said.