Kotak Bank plans to grow its unsecured retail book, says Shanti Ekambaram

Shanti Ekambaram says any fintech which is into the data science and analytics space will work with banks that have large consumer bases.

Kotak Mahindra Bank plans to push its unsecured retail book to the mid-teens from the current 10.7 percent, said Shanti Ekambaram, Whole Time Director, Kotak Mahindra Bank.

“We are very clear on the unsecured retail book and mid-teens is what we look to keep the portfolio. These include our microfinance and credit card business,” Ekambaram said.

In an exclusive interaction with Moneycontrol, Ekambaram highlighted that the bank will have a balanced approach where it would manage risks efficiently in the segment.

“During the pandemic and as COVID-19 was nearing its end, our unsecured portfolio was around 3.5-5 percent of the total portfolio and all other banks had around 15-20 percent,” Ekambaram said.

"With this, our strategy was and is to keep a cleaner environment. Also, deep investments in data analytics helps,” Ekambaram said.

“During bad times, it is important to look at who you are doing business with. The biggest risk of the unsecured segment are economic risks like loss of jobs, and shrinking economy. Here, managing risks is important. Our bank and all banks have strong recovery mechanisms,” Ekambaram said.

The Reserve Bank of India (RBI), in the past few months, have warned banks to be cautious about aggressively growing their unsecured portfolio.

“The lack of credit history of borrowers and good collateral, combined with information asymmetry, exacerbates the challenge for lenders to lend,” the RBI said in the monthly bulletin on July 17.

The regulator’s observation is significant in light of a significant increase in retail unsecured loans by Indian banks in recent months.

According to RBI data, bank lending for credit cards, personal loans, and similar products has seen a notable rise in the past year.

Increase in unsecured retail loans

In Kotak’s case, the bank has recorded an increase in unsecured retail loans during the April-June quarter, when compared with the year-ago period, with credit card outstanding and microfinance loans surging aggressively.

Retail unsecured loans of Kotak Mahindra Bank reached 10.7 percent of the total loan book as at the end of June 2023 from 7.9 percent a year back, according to an investor presentation by the private sector lender.

The stock of Kotak bank was trading at 1809.00 a piece, up 0.88 percent at the time of publishing the story.