ICICI Bank is reverting to its origin of corporate lending, said CEO Chanda Kochhar. The bank had become a leader in the banking sector in the country over the last decade because of the retail lending sector. But the rising defaults has drastically affect it thus forcing it to reduce its unsecured retail loans, personal loans and credit card portfolio.
Ms. Kochhar said, “The whole credit atmosphere in the country changed in such a manner that the actual loss ratios turned out to be much higher than what everyone envisaged.”
The bank did not experience any problems with sub prime mortgage loans. It has a robust home loan and car loan business that is increasing regularly. Also the losses experienced by the bank in the unsecured loans, has affected it Ms. Kochhar said.
The default rate on credit cards has gone up to 12% while the retail loan defaults went up to 8%. Due to this ICICI has halted its lifetime free credit card scheme.
Ms. Kochhar said, “At these high default rates, the whole business is not as viable. It’s not going up from here, but it’s not going down either”.
She said the retail loan portfolio of the bank has reduced from 65% some years ago to 55% currently. It is likely to reduce to 50 % shortly.
She added further, “Until the circumstances change and change customer behavior, this portfolio is going to continue to remain a little risky”.
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