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“We are also focusing on the smaller end of the small and medium enterprises (SME) segment, the one that typically has a loan requirement of Rs 5 crore and below. We are planning to grow this segment,” said Sanjeev Lall, managing director, Head Institutional Banking Group and Branches, India, DBS.
“We are focusing aggressively on growing our SME portfolio. Currently, this segment contributes to approximately 15 per cent of our total loan book and we are aiming to double the contribution by 2017,” he added.
As the end of the last financial year, the total advances of DBS stood at Rs 15,155 crore.
Foreign lenders including DBS are not very active in the lower end of the segment within the SME business. Typically, this segment has been dominated by public sector lenders but now several mid-sized private banks have also been increasing their focus in the sub-Rs 5 crore segment.
Apart from growing the loan book size, banks also believe that giving loans to the smaller SMEs can also help them meet the priority sector lending norms. As per the Reserve Bank of India guidelines, micro and small enterprises are the ones in which the loan size is between Rs 10 lakh and Rs 5 crore.
The fact that the large and medium corporate have yet not started lending aggressively is yet another reason that banks are looking at tapping the SME business.
However, banks have earlier burnt their fingers in the SME segment and therefore are looking at moving selectively. Lall explained that even though they are not planning to avoid any particular sectors as such, the bank would be looking at it on a case by case basis before dispensing loans.
Lenders also believe that the overall quality of the SME loan book has improved in the past few quarters, giving them more strength to lend to this segment.
DBS is also aggressive in SME lending in other markets such as Singapore and Hong Kong. Lall believes that the experience gained in these markets can be used to grow the loan book in India.
