Retail loan growth has been one of the key drivers of the overall loans for the banking sector in Q3FY22. While corporate loan growth is coming back, in the form of working capital; retail loan growth has been fairly strong in the quarter.

But, it has come at a huge cost. Look at the opex (operating expenses) growth, it has been higher than the retail loan growth for the majority of the lenders.

The cost side has remained elevated as the growth has been largely led by direct selling agents (DSA) whose commission has to be paid upfront.

Most of the loans are transfers from other lenders (banks, NBFCs, etc) rather than fresh loans disbursal.

Kotak Bank & RBL bank have seen massive rise in their opex due to its retail loan growth:

HDFC Bank’s quarter-on-quarter (QOQ) operating profit growth remained robust despite increase in its operating expenses. Kotak Bank & RBL Bank have been impacted negatively, w.rt. rise in opex as their operating profit declined YOY & QOQ

*Q2FY22 was -30.83%QOQ & Q3FY21 was -3%YOY; hence base effect played into the growth

Cost to income ratio largely remained stable for HDFC Bank, improved for Canara Bank and Federal Bank; while it deteriorated for all the others

Loan growth has come at a huge cost. Look at the opex (operating expenses) growth, it has been higher than the retail loan growth for the majority of the lenders

First Published:Jan 31, 2022 4:50 PM IST