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Hoping to offset a slow recovery in corporate lending, Indian banks are pushing into credit cards and personal loans, using blanket advertising, cold call campaigns and even sending employees to malls to lure customers. Given the high margins and huge growth potential, India's 20 million credit cards for a population of 1.3 billion amount to just 0.5 percent of total outstanding bank credit. Unsecured personal loans make up just fewer than 4 percent of all loans. 

"For the industry as a whole, since a couple of years ago we've seen a slowdown in corporate lending. So there is a genuine push towards the consumer lending space," said Sumit Bali, a senior executive vice president at Kotak Mahindra Bank Ltd. While home loans continue to make up about half of consumer loans, Bali said there was an "increasing appetite" for credit cards and unsecured lending, with Kotak aiming for up to 35 percent and 45 percent growth, respectively.

"If an unsecured portfolio goes bad, then it can wipe out your profits pretty fast which is what most of the people saw when it happened (after the financial crisis)," said Harjeet Toor, head of retail assets and small business lending at RBL. Currently, across the industry, 3 to 5 percent of credit card loans and 2 to 3 percent of personal loans go bad, mostly below the sector's overall bad loans ratio of 4.5 percent, he added.

By Premji