Banks in India slashed unsecured lending after personal loans and credit card dues turned bad following the global financial crisis. HSBC India saw a 46 percent drop in overall profit for the first half of 2009 as losses on retail lending more than doubled.

"At this stage, we are well positioned to grow our unsecured book, but we will do it in a cautious and calibrated way," Stuart Davis, who took over as India chief executive in April 2009, told Reuters in an interview on Tuesday.

"We won't be looking at open market sourcing as we did perhaps four or five years ago," he said, referring to the practice of issuing cards to customers who do not already have an account with the bank.

HSBC's expansion of unsecured lending in India comes as it is turning around the performance of its retail banking operations in the country, the sixth biggest contributor to the UK-based bank's group profit.

In the first half of 2011, HSBC, Europe's biggest bank, posted a loss of $4 million in its India retail banking and wealth management business, narrowing from a loss of $49 million a year ago.

Fewer than 18 million of India's 1.2 billion people use credit cards. In China, a country with a slightly higher population, more than 200 million credit cards were in use as of a year ago.

Foreign banks lack the branch networks of local lenders like ICICI Bank and HDFC Bank, India's biggest card issuers, but tend to attract the most well-heeled customers in a country where incomes are rising fast.

London-based Standard Chartered, one of the biggest foreign banks in India, expects growth of 30-35 percent in new customers this year, Shyamal Saxena, head of retail banking products, had said in July.

HSBC's overall first half pre-tax profit in India rose 32.6 percent to $451 million. The bank is on track to achieve its target of $1 billion in India overall profit in 2013, Davis said.

LOAN GROWTH

HSBC, one of the top three foreign commercial banks in India along with Citigroup and Standard Chartered, expects to grow its India loan book "at least in line" with the sector's growth in this fiscal year, Davis said.

The country's central bank expects credit growth at 18 percent in this fiscal year, down from an earlier projection of 19 percent. HSBC posted a 17 percent rise in demand for loans in the last fiscal year to end-March 2011.

India raised interest rates last week for the 12th time in 18 months, triggering worries about a slowdown in demand for corporate and retail loans from banks.

"There is certainly a slowdown in loan demand...(but) we are not looking at a situation that we are looking at in Europe and the U.S. where loan growth is negligible," he said, adding the bank also plans to grow its India mortgage loan book.

The bank's home loan book in India grew 11 percent in the first half of this calendar year to $949 million.

"We feel very positive about the growth scenario and our business here and in the absence of some unforeseen macroeconomic downturn here in India we are positive about our growth," Davis said.

The bank, which plans to shed 30,000 jobs globally in the next three years to cut costs, expects to raise its India banking operations headcount over the next few years from about 7,500 now on the back of growth in its business, Davis said.