By Siddhi Nayak and Ira Dugal

MUMBAI (Reuters) - State Bank of India (SBI), the country's top lender by assets, expects the industry's concerns over retail borrowers defaulting on small-ticket loans to ease on the back of tighter credit reporting rules, its chairman said.

In January, India's central bank mandated that credit bureaus update borrowers' credit information on a fortnightly basis against once a month earlier.

"Lenders now know that a certain customer has reached his leverage, and beyond that, we should not give him additional credit," Challa Sreenivasulu Setty, the chairman of SBI, said in an interview late on Tuesday.

SBI has a total loan book of 40.67 trillion rupees (about $469 billion), with more than a third of it in personal loans.

As young Indians become more comfortable with taking on loans, household debt in the South Asian country has risen to nearly 43% of GDP, according to data from the regulator.

Private banks and non-bank lenders have grown their personal loan books aggressively but reported an increase in bad loans in the six months through December.

A weaker economy, which is expected to expand at its slowest pace in four years, and excessive lending to some customer segments have led to an increase in stress.

SBI, however, does not see a build-up of stress, its chairman Setty said.

"I don't see any headwinds in terms of asset quality. We have an excellent book on unsecured personal loans and corporate credit is holding up very well," he said.

SBI reported stable asset quality for the October-to-December quarter with bad loans at 2.07% of its total assets.

Over the past year, regulators have sought to examine whether personal loans are being used to invest in the stock market, which could lead to an increase in defaults amid market falls.

SBI's Setty sees no sign of such practices in the bank's loan book.

TARGETING THE AFFLUENT

While low wage growth and high inflation have hurt India's "middle-class", the number of the affluent have also grown, prompting SBI to sharpen its focus on them.

Goldman Sachs in a report last year said the number of affluent consumers in India, who earn more than $10,000 a year, could rise to 100 million by 2027 from 60 million in 2023.

"We are looking at customers below one level of what was considered premium to try and add value," Setty said.

The bank has hired nearly 2,000 relationship managers this fiscal year to target the mass affluent customers, which it defines as those with a banking relationship value of 3 million rupees and higher, Setty said.



SBI is offering premium banking services to attract depositors with privileges associated with credit cards, even as there are no concerns over garnering deposits, Setty said.

"We have one of the largest wealth teams now, apart from the premier banking relationship teams," Setty said.

($1 = 86.7180 Indian rupees)

(Reporting by Siddhi Nayak and Ira Dugal; Editing by Mrigank Dhaniwala)