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Retail advances at India’s most valuable lender HDFC Bank expanded at the slowest pace since the quarter ended March 2015, opening up a 12 percentage point gap with the corporate loanbook growth rate, pointing to a likely revival in financing demand from companies.
An analysis of the blue-chip bank’s fourth quarter earnings, released over the weekend, showed that the pace of advances to individuals was at 19 per cent in the March quarter, compared with a 31 per cent growth rate for corporate loans.
This gap, at 12 percentage points, is the widest since March 2015 when retail loans expanded at 15 per cent and corporate loans at 27 per cent.
HDFC Bank’s total loan book stood at Rs 819,401crore as of March 2019.
Retail loans accounted for 54 per cent of the total advances at the lender.
Slower retail growth for the bank, considered a bellwether for individual banking in India, and circumspect management commentary on the business have led to concerns whether risks might mount in the future in this category of loans for high-street banks that lately preferred individual borrowers to companies after bad loans climbed in the latter category of advances.
In the post-earnings call with analysts, the HDFC Bank management said it is watching the retail business closely.
“On the retail front, we have neither seen deterioration nor an improvement… it is relatively stable.
So we are watching,” said Sashidhar Jagdishan, CFO at HDFC Bank.
“Whenever you see a strong growth rate, the architecture itself pulls back on the growth rate to wait and watch how the portfolio behaves.”
To be sure, analysts say that the relatively slower pace of growth in retail loans cannot yet be attributed to higher risk assessment of the bank on this portfolio.
“So far, it does not look like there is a problem in retail loans.
But the industry has been experiencing some issues in SME and MSME segment loans because many of these entrepreneurs take personal loans also to do their business,” said Kajal Gandhi, vice president, research, at ICICIdirect, the retail broking arm of ICICI Securities.
“If this SME/MSME crisis deepens or interest rates remain high, there could be a stage when these loans may be at risk.
Banks and analysts are watching the surging retail loan portfolios.”
A report on retail delinquencies by credit information company Cibil, released at the end of March, showed that delinquency rates remained stable.
Credit card, home loan, and personal loan delinquencies remained flat.
“All reports and banks’ data points have so far not shown any uptick in retail delinquencies.
Apart from loan against property, all other retail portfolios are doing fine.
So, there is no cause for alarm,” said Mona Khetan, analyst at Reliance Securities.
