The nation’s biggest lender by assets, State Bank of India (SBI), is eyeing around 12% loan growth to the small and medium enterprises (SMEs) sector in the current financial year. Demand for loans in the corporate sector continues to remain muted.
The public sector bank would like to clock a 14-15% SME loan growth this fiscal, but a 12% increase seems to be most feasible, managing director (National Banking Group) Rajnish Kumar said at the CII Banking Colloquium here on Friday.
“Last year, growth of credit to SMEs was flat and literally there was no growth. This year, we have been optimistic with SME loan growth as order book and cash flows (of SMEs) are increasing. Credit growth to them is expected to be 10-12% in the current fiscal,” Kumar said, adding that in the area of SME credit, SBI is active with products such as loans against property and supply chain financing.
According to him, the state-run lender is moving towards cash flow-based financing instead of balance sheet-based financing for SMEs. “To begin with, we are moving towards cash flow-based financing instead of balance sheet-based financing, particularly for loans up to R50 crore to these enterprises,” Kumar said.
He said the overall loan growth for his bank should be around 13-14% in the current financial year although in terms of corporate lending, demand for loans was much less.
“There are no major projects which consume huge capital. There are shifts in the sectors’ contribution to the GDP. The services sector contributes more to the GDP as compared to manufacturing. Thus, composition of credit is also shifting,” Kumar said.
On merger of SBI with its associate banks, Kumar said there would be no closure of branches, but they could be reallocated after the merger.
“Post merger, there will be no closure of branches, but there will be a need for optimisation and reallocation of branches. We are studying what will be the total number of branches after merger,” he said.
The merged entity will have a network of over 24,000 branches. Kumar said the merger was likely to be over within this fiscal. There would, however, be “some issues’’ when it came to merger of HR practices and policies of the associate banks.
Notably, two independent directors of State Bank of Travancore have expressed concerns over “the manner in which the merger procedure is being followed”, demanding transparency.