The transformation of the Indian financial sector began with consumer credit profiling by credit information company such as CIBIL and later permitting Equifax and Experian to compete in the world’s largest democracy. In the last 5 years, Credit bureaus have been a game changer for the personal / business loan and credit card segments.
Unsecured products (personal /business loans, credit cards ) are seeing continued momentum in growth. However, this difference between current and previous cycle (2004-07) is the profile of the customer – salaried / self-employed customers in the mid-to-high income bracket vs low-income customers with no-proven income / repayment record in 2004-07. Hence, lenders are comfortable with higher ticket sizes (Rs0.7-0.8m for personal loans, Rs1.2-1.5m for business loans) unlike sub-Rs0.2m in the previous cycle. It is not unusual anymore to see personal loans going up to Rs2.5-4m in metros for high income salaried customers – unheard of, in the past. About half the personal loans are used to fund either a land purchase or the own-equity component of a property. The other half largely goes towards funding either medical needs of the family.
According to the industry analysts, HDFC Bank has almost “mastered” the art of retail lending, given its strong customer franchise, well-entrenched processes and superior degree of risk management and control and cross-sell abilities.