Kamath: Caution on Retail Lending, Portfolio Balance

Mumbai, Sep 12 (PTI) Banking industry veteran K V Kamath on Friday advised caution to lenders on retail exposures in the future and asked them to ensure that there are no portfolio imbalances.

Speaking at a Bengal Chamber of Commerce and Industry event here, Kamath, who is the non-executive chairman of Jio Financial Services, said corporates' reliance on bank funding will decrease over time and a major portion of the business for banks will come from retail segment.

"Asset quality can very quickly sour there (in retail). I cannot say that there will be no problem at all," he said, specifying the problem areas he sees.

The risk can particularly stem from portfolio imbalances, he said, adding that a large proportion of unsecured loans can get un-collectable due to any reason and drill a hole in the balance sheets.

"One has to exercise caution," he said, adding that banks also have to contend with fintechs.


The new-age fintechs are extending loans to customers with low credit scores as well, and over-leverage is a reality in the retail lending segment, Kamath said, wondering how the debt is getting serviced and if it is getting serviced at all.

Citing Sebi data, he said small investor have lost Rs 1.75 lakh crore in the derivatives segment alone.

"As a banker, I will always be cautious when there is exuberance beyond what we expect in the market place. All regulators are tightening up, hope this becomes smooth landing. If not, you will see a bad debt rising," he added.

Meanwhile, Kamath welcomed the domestic investors' play in the equity markets, adding that external money should ideally come as foreign direct investment.

From a growth perspective, it is essential to have a 'growth runway' for a country, Kamath said, explaining it with the examples of Japan and China.

China's growth started around the year 2000, he said, adding, "I think they have exited their journey and run out of runway.