The country’s largest private sector lender HDFC Bank is confident that consumer demand has recovered despite the current economic uncertainty and slowdown, and said business across most segments is back to almost 80 per cent to 90 per cent of the pre-Covid levels. In an interview with BusinessLine , Parag Rao, Country Head - Payments Business, Consumer Finance, Digital Banking and Marketing, HDFC Bank, said there has been no dilution in the bank’s credit policy, and said he expects the festival treats campaign to do even better than last fiscal. Edited Excerpts:
Why did you choose to launch the campaign amid the current slowdown?
This year we are pretty confident that it will give us much more business. This is because there is increased interest in online offers; there is emergence of newer categories of spends, which normally are not associated with festivals – grocery, day-to-day shopping, online consumption of premium services, education, wellness, and consultation with doctors. Also, work from home and schooling from home has created new categories of demands.
While April and May was bad, we started seeing growth in the physical retail space from June, but was still subdued. The Unlock started post July and still opening up.
Confined to homes, people are bored, and have not spent the way they usually do. Festivals are the right time for spending, and we expect a lot of people to spend on the categories they did not in the last six months.
But with job losses and salary cuts, is there enough consumer demand?
Across most businesses, we are almost at 80 per cent to 90 per cent of pre Covid-January levels by August and September. Last year, the peak was in January. Some businesses are almost back to normal, and gold loan and consumer finance business have crossed the January level, giving us confidence.
Card spends are already touching almost January levels and are at 90 per cent to 95 per cent, so we see green shoots coming back. This is despite that three clear areas of spends are zero — airline, travel spend and eating outs pend. They used to contribute to close to 20 per cent of card spends earlier.
We are sending two messages — as a large bank, we will do our bit to stimulate the economy and increase consumption and we will help our customers fulfil their needs even in the tough times. We have got a lot of loan offers in the festival treats campaign — two wheelers, auto and personal loans as well as EMI offers.
Is the bank being cautious on lending?
The track record of the bank has always been to be prudent, but passively aggressive in expanding the market. This is why we have the best quality of book across the loan segment in the industry. That philosophy will not change. We continue to be prudent and continue to be prudent on the segments that we will source from. We will continue tapping into potential segments where we believe there are good customers. There is no dilution in credit policy.
In unsecured loans, we have predominantly taken a salaried approach, but there are good segments in self-employed space such as professionals – doctors, lawyers, CAs, educationists, big merchants.
What about on boarding new customers on credit cards?
Some segments will see some stress and have not stopped sourcing, but we have looked at what we call mitigants and have tweaked some of the loan parameters so that our exposure is not high in those segments. But that is not only because of the pandemic, but is part of the prudent credit policy approach. The slowdown happened in April and May but not due to credit reasons but only due to the lockdown. That is coming back to normal.
What are the repayment trends and restructuring requests?
We see no worries in our portfolio, customers are behaving very well. We have been showing continuous quarter-on-quarter growth, we are very bullish about the market. We will be cautious in areas where required, but we are also very clear that we will continue growing.
Other banks are also launching festival-related campaigns…
Our strategy is based on our strengths. We have just not brought offers, we believe we are bringing the strength of the bank together and we are very consistent in going back to the customer with the best of deals. We are confident of festive treats 2.0.