Retail lending head Sumit Bali said 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 Covid impact has now waned and risk appetite is returning. We plan to progressively increase our exposure to low tenure unsecured loans,” Bali said.
Retail loans at ₹3.5 lakh crore constitute 56% of the bank’s net advances out of which 80% was secured at the end of September 2021. Bali said this ratio will drop as the bank looks to improve profitability.
Secured loans are led by home loans, auto loans and collateral linked loans to small businesses and loans against property (LAP). Bali said the bank’s risk management and underwriting capabilities are now tried and tested, allowing it to enter riskier loan segments.
Unsecured loans typically come with higher margins. Personal loans, for example, have 7 to 8 percentage point higher margins than the 1% to 1.25% margin on home loans while for unsecured loans to small businesses, it could be 9- 10 percentage points higher, Bali said.
Home loans make up 37% of the bank’s retail loans followed by rural, auto , personal loans and LAP.
Axis also offers a business instalment loan of a ticket size below ₹10 lakh to the self-employed. Bali said he expects demand for loans from that segment as economic activity picks up. “The pandemic has changed the spending mindset of customers. Though some segments like travel or restaurants have taken a hit, we are seeing positive indicators in terms of retail spending helped by the hybrid work model.”
Axis had an 8.5% share in credit card spends led by retail at the end of September. It is banking on partnerships with the likes of Flipkart to ramp up issuances and spending.
The bank is also in the race to buy Citibank’s retail franchise in India, which was put on the block in April. “It is public knowledge that we are one of the bidders. It is a mix of retail assets, liabilities and wealth management which are good segments to be in and we are interested,” Bali said.