StanChart on credit offensive

Plans huge expansion on credit cards, personal loans; says retail loan quality not a problem.

Fears of slow economic growth and its cascading effect on loan quality do not seem to deter Standard Chartered Bank from aggressively expanding its unsecured assets in India. The foreign lender aims to double client acquisition in its cards business by issuing at least 50,000 credit cards every month in the next calendar year.

"We have aggressive plans to grow our unsecured assets business, both on the cards and personal loans side. This will not be unbridled expansion and will not compromise on credit quality," Shyamal Saxena, general manager, retail banking products and consumer banking for India and South Asia, told Business Standard.

Adding: "We have increased our new acquisitions in the cards business by three times over last year. I will be surprised if we don't increase it by another two times as we go into the next year.”

StanChart has the largest branch network among foreign banks in India and aims to close this calendar year with monthly issuance of 25,000 new credit cards. In 2010, the bank was issuing less than 8,000 new credit cards every month. Currently, it has a portfolio of 1.1 million credit cards.

“The fact that we want to offer unsecured products to our own customers remain a key pillar of our strategy. But an unsecured product is only the hook; the strategy is to then cross-sell other retail products,” Saxena said.

To attract customers the bank has introduced an ‘instant approval’ engine on its website where new card applications are given in-principle approvals immediately, based on a customers' credit score. Saxena said the bank had automated its entire processing chain to ensure new credit cards were dispatched within 36 hours of approval.

The bank is also exploring ways to transform its distribution model, to reach out to a larger number of clients. “We are exploring joint ventures with large format retail chains, where we plan to offer co-branded cards to people who come for shopping. These are things where we are investing to ensure we reach out to a large number of customers,” Saxena said.

He said the improving standards of credit bureaus in India would ensure the bank’s asset quality was not stressed despite expansion of unsecured assets. In the first six months of this calendar year, loan impairment charges of the bank surged 67 per cent from a year earlier to $72 million. However, pressure on asset quality was more on the corporate side than on retail loans. The loan impairment charges for consumer banking was $20 million, while fit was $52 million for wholesale banking.

“We are seeing some early stress (on health of assets) in this environment but it has not led to our loans becoming non-performing yet,” Neeraj Swaroop, regional chief executive for India and South Asia, said at the bank’s half-yearly earnings announcement in August.