Former HDFC chairman Deepak Parekh flagged two rising considerations in India’s banking panorama — microfinance stress and the unchecked development of unsecured lending — throughout a candid podcast dialog with former ICICI Financial institution chief Chanda Kochhar.
“Microfinance worries me,” Parekh stated, pointing to alarming asset erosion ratios (AERs) and hovering non-performing belongings (NPAs). “Should you see—15% to 18% NPA—you don’t get a margin of that a lot. And the quantity can be staggering. What I learn was about ₹60,000 crore in NPAs on a ₹3–3.5 lakh crore e-book.”
Parekh, who led HDFC by a long time of economic evolution, stated these tendencies will not be simply statistical blips however sign systemic stress. He expressed equal concern over the aggressive push by NBFCs and banks into unsecured private lending. “There’s a little difficulty in unsecured loans,” he warned, citing rising defaults and dangerous underwriting practices.
He careworn the significance of mortgage self-discipline on the retail degree too. “I believe solely 25% of somebody’s revenue ought to go towards mortgage reimbursement,” Parekh suggested. “You want the steadiness for your loved ones, maintenance, taxes.” The exception, he famous, is for ultra-high internet price people.
Whereas he acknowledged India’s retail credit score penetration stays low—shopper credit score stands at 40% of GDP versus 70% in China and the U.S.—he warned that assembly future demand might be troublesome until banks can fund that development. “Retail demand is rising, however the banks want cash to do this,” Parekh stated.
He additionally flagged low insurance coverage penetration and weak family financial savings as structural headwinds. “It is a concern the RBI should deal with,” he stated, calling for warning at the same time as India’s monetary aspirations proceed to soar.
