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Private banks are ready to bet big on SME segment
Private sector banks have turned to small and medium enterprises (SMEs) to drive their business growth, seeing stress in retail segments like commercial vehicle and commercial equipment finance.

The high profit segments like credit cards and auto loans in retail credit have tapered down. And increased competition in the home loan segment also has forced private banks to guide for lower growth from retail going forward, according to a report by Business Standard.

“We believe MSME or business banking will spur the next leg of growth for private banks as capital constraints weigh down public sector banks," Saikiran Pulavarthi, analyst with Espirito Santo Securities, said in a note to clients, as quoted by the BS.

Bankers claim that in recent years the quality of SME loan book has improved and lenders have followed strict credit appraisal process in an uncertain economic environment. It has been on the rise for last three or four years, the slowdown in large corporate loan disbursement has prompted many lenders to bet big on the SME segment.

"We want to be known as the SME bank of the country.”Antu Joseph, head of SME, agri and financial inclusion businesses at Federal Bank said.

The share of SME loans in total advances has now improved to 25% from 20% a year earlier. We have seen good growth in this business and in the current financial year our expectation is around 22% rise in SME advances, Joseph added.

Although majority of the SME loan market share has been controlled by state-run lenders still now, industry analysts believe that large private lenders like HDFC Bank and Axis Bank have already stepped up efforts to accelerate growth in this business.


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