Axis Bank, a prominent private-sector lender in India, is keeping a watchful eye on the quality of its personal loans even as it seeks to expand its portfolio based on its internal risk appetite. The bank’s CEO, Amitabh Chaudhry, emphasized that the institution does not offer personal loans below ₹50,000 and is committed to growing its personal loan book while maintaining prudent lending practices.
As of September 30, the bank’s personal loan book had grown 25% year-on-year to reach ₹61,168 crore. However, Chaudhry stressed that this growth will not occur at the expense of higher credit costs. Approximately 24% of the bank’s retail book consists of unsecured loans, while secured housing loans represent the largest segment, accounting for 31% of all retail loans.
Chaudhry stated, “We have made the statement quite clearly that we are planning to grow based on risk guardrails we have set for ourselves. This growth is not coming [by] compromising on what we believe is the right kind of risk to take.”
In recent times, large lenders, including non-banking financial institutions, have expressed concerns about the potential risks associated with small personal loans, particularly those below ₹50,000. Data from TransUnion Cibil indicates that these small loans constitute about 2% of all personal loans.
Chaudhry emphasized that the bank’s current portfolio shows no signs of its risk framework failing. Nevertheless, Axis Bank remains vigilant about monitoring economic conditions and stress points while maintaining a focus on risk management. Chaudhry also expressed optimism about the ongoing growth momentum.
Sumit Bali, the Group Executive and Head of Retail Lending at Axis Bank, revealed that the bank has consciously avoided the sub-₹50,000 personal loan segment due to higher delinquency rates. This segment has raised concerns in the industry and has prompted lenders to assess the associated risks carefully.
On Wednesday, Axis Bank announced a net profit of ₹5,864 crore for the September quarter of FY24, exceeding market expectations. A Bloomberg consensus estimate had projected a net profit of ₹5,754 crore for the quarter. The bank’s provisions increased by 48.2% year-on-year, reaching ₹815 crore, but were down by 21% sequentially. Importantly, the bank did not utilize COVID-19 provisions during the quarter and maintained cumulative provisions of ₹11,758 crore as of September 30. These provisions are in addition to non-performing asset (NPA) provisions included in the provision coverage ratio calculations.
Axis Bank’s net interest income, the difference between interest earnings and expenditures, increased by 19% year-on-year, reaching ₹12,315 crore, while the net interest margin (NIM), a key profitability metric, was at 4.11%, up 1 basis point sequentially.
The bank’s asset quality also improved in the third quarter, with gross and net non-performing asset (NPA) ratios at 1.73% and 0.36%, respectively, compared to 1.96% and 0.41% on June 30.
Chaudhry expressed confidence in the bank’s performance, indicating that the profit-and-loss performance and balance-sheet quality have improved significantly. This development provides assurance that the bank can sustain its performance across various economic cycles.
Axis Bank’s cautious approach to personal loans and its ongoing efforts to monitor asset quality underscore the importance of responsible lending and risk management in the banking sector. Maintaining a balance between growth and risk management is essential for long-term financial stability and customer protection.
