India's consumer credit market is under-developed and there is more scope for the banks to grow in this market, according to The Asian Banker.
In a recent research report released this week, the research house, which publishes a banking journal, said the ratio of retail credit to gross domestic product in India has remained low at 6.5 per cent, compared with 10.2 per cent in Thailand, 49.3 per cent in Malaysia and 68.4 per cent in South Korea.
The research report, which attempted to spot the best retail bank in India, said ICICI Bank has better penetration in the retail loans market because of its efficient distribution channel compared with its counterparts.
It said ICICI Bank's score under the category of 'retail market penetration and efficiency of distribution channels' stood at 4.2 points, higher than HDFC Bank's 4 points and State Bank of India 2.8 points.
"Even though ICICI Bank has a lesser number of ATMs compared with State Bank of India, its alternative channels, such as the Internet and e-lobbies, offer its customers a comprehensive choice of self-service options," said Michael Araneta, senior research analyst at The Asian Banker.
"ICICI Bank has made good headway in capturing and enlarging its market share in the retail segment. However, in its bid to do this, it may have compromised on margins. ICICI Bank currently has the lowest margins in the industry," said Araneta.
On HDFC Bank, the report said, "Given its clear focus in niche areas, the bank has been able to maintain a high net interest margin compared with its peers. Profits from the retail segment comprise more than 25 per cent of its total bottom line."
Moreover, the banks scores ahead on the risk management front. "HDFC Bank has a strong risk management mechanism and it belongs to the category of banks with the lowest non-performing loans in the industry. The bank has been more focussed than ICICI Bank," said the report.
Under risk management category, HDFC Bank secured 3.8 points, compared with ICICI Bank's 2.9 points and SBI's 3.1 points.
