Banks are turning their focus to retail, mid-corporates and small and medium enterprise segments as they look to cut exposure to big corporates. The change in strategy comes as banks are concerned about rising non-performing assets and fear fresh slippages from the restructured assets.
Also, the existing SME and mid-corporate accounts will be under intense scanner and banks are getting extremely cautious with new advances given to these segments. “We will continue focusing on SME and mid-corporates. But there will be strict monitoring on these accounts in the current and the coming quarters,” said Sanjay Arya, executive director, United Bank of India.
Bankers feel retail is one segment where they can bank on in the coming quarters. “We will be cutting our exposure to large corporates and will be selective in SME and mid-corporate accounts. We are hopeful on the retail portfolios. With our competitive rates on home and auto loans it will be easier to grow this portfolio further,” said Pratip Chaudhuri, chairman, State Bank of India, the country’s largest lender.
While growing the retail portfolio, banks would also go slow on deposit growth to manage their net interest margin (NIM).
NIM is the difference between interest earned and interest paid expressed as a percentage of the bank’s total assets over a given period.
Banks typically earn more interest on retail and SME advances as credit risk is more with these portfolios. “In this festive season, we expect a growth ranging from `30,000-40,000 crore in the home loan portfolio,” said Chaudhuri.
In its mid-year monetary policy review, the Reserve Bank of India (RBI) said it would try to put a mechanism in place to assess the asset quality of micro, small and medium enterprises (MSME).
Banks are currently working out the system to assess the risk and asset quality associated with those advances.
“We are trying to put an in-house system in place to asses the risk of MSMEs more closely,” said a senior SBI official. Banks will be realigning their strategy by planning an increased credit flow into retail, agriculture and SME sectors in the coming quarters, experts said.
A senior Central Bank of India official said, “Banks will increase lending to MSME sectors as they lend against strong collaterals than to big corporates.”