The festive season has been good for banks. Consumption-led businesses have shown strong growth in this festive season. In the initial five months of the pandemic and during the nationwide lockdown, consumption had reduced. In an interaction with Hiral Thanawala of Moneycontrol, Sumit Bali, President and Head – Retail Lending & Payments, Axis Bank, who joined the bank during the pandemic, discusses how consumption-led demand has been picking up. As of September 2020, Axis bank had 80 per cent secured and 20 per cent un-secured loans. Home loan, loan against property and loan for passenger cars contributed up to 65 per cent in the half-year ended September 2020.
How was the festive period for the bank in terms of lending growth?
Consumption-led businesses have shown strong growth in the festive season. People are spending at shops and restaurants again. Post-Diwali, it’s a cooling off period for couple of weeks. But we are expecting business to pick up again from mid-December, when the holiday season resumes, as customers will travel, shop and dine. Also, we expect demand for car loans to pick-up with year-end offers coming from manufacturers. The demand for home-loans has been steadily increasing and is expected to continue for the bank because interest rates are at a 15-year low; good offers from developers and state governments offering lower stamp duty for a limited period of time are also demand drivers.
Given that you joined the bank in the midst of the pandemic, how has been the journey so far?
Yes, I joined in July and it was an interesting point in time, as the unlock phases had just begun in the country. When I joined, an important task was to increase the volume of loan disbursals, while maintaining the asset quality. We decided to increase volumes strategically, focusing more on secured loans and less on unsecured loans. This approach worked well.
From July, the disbursals picked up. Our loan book is also growing steadily month-on-month and we are almost back to pre-COVID levels in all the secured products. On the unsecured side, we are scaling up in a measured way by focusing on existing bank customers. The unsecured products include personal loans, credit cards and business instalment loans.
Home loan interest rates are at a 15-year low. Has there been a rise in demand from existing home loan borrowers for balance transfers?
Yes, there has been a fair bit of activity on balance transfers in the home loan segment. This is because some of the housing finance companies (HFCs) have not been passing on the rate cut benefit to their existing customers. The internal benchmark rate at HFCs, to which rates are linked, has not moved down in line with reduction in borrowing costs. Therefore, we are seeing a lot of those customers opt for home loan balance transfers to banks, where the rates are linked to a transparent external benchmark such as the repo. Banks are thus gaining market share in mortgages.
Also read: Switch to repo-linked home loans in COVID times, save on EMIs
In the last 15 months, we have seen two private banks and a co-operative bank being placed under moratorium by the RBI. What are the key lessons for depositors from these episodes?
Depositors should bank with the safe, reputed and well-managed banks. These are important parameters to consider while banking. Due to the recent events, customers have become more discerning about where they keep their money. Hence, we are seeing deposits shift to well-managed private sector banks.
How have loan collections been after the moratorium period ended in August? Has there been greater demand for loan restructuring as per RBI’s guidelines?
Overall, the collections were better than our projections, after the loan moratorium period ended. In secured loans, the collections are almost close to pre-COVID levels in terms of performance which is a pleasant surprise.
In terms of loan restructuring, we have not seen much demand yet. We don’t expect this to be a material number.
Also read: Demand for bigger houses coming from smaller cities | Aadhar Housing Finance