Providing a small relief to the SME customers in the rising interest rate scenario, some major public sector banks are offering concessional lending by reducing the spreads loan pricing.

While pricing loan products, banks add different charges (over the base rate below which they cannot lend) called spread on account of various risks that may differ from customers to finalise a lending rate.

Confirming the development M Narendra, CMD, Indian Overseas Bank said though the bank raised its base rate, it is not looking at increasing its spread across the segments for SME and retail borrowers.

?This is a conscious move to give some relief to our borrowers in the rising interest rate scenario. Our effective rate of interest as of now is ranging between 12.50% and 12.75%. Still, in case of a rated MSMEs, we are ready to charge an interest rate of merely 1.5% plus our existing base rate, which was at 10.75%. In addition to it, we are also giving a discount of 0.25% to our SME borrowers in case they have got investment grade ratings internally by agencies like Dun & Bradstreet,? he said.

Indian Overseas Bank?s MSME portfolio is at R16,000 crore or 16-17% of its total loan book. The bank is planning to increase it to R22,000 crore by the end of the financial year.

BP Sharma, general manager, MSME, Punjab National Bank (PNB), also said that the bank is already providing a concession of 75 basis points in the interest rates in the micro loans segments. Now, PNB is working on the same lines for providing relief to the other segments like SME and MSME.

The idea behind providing the relief in interest rate is to help those who really need bank?s support for their growth. ?We are trying to ensure how to reduce the burden which has arisen due to rise in interest rates,? Sharma said. On an average, PNB charges an interest rate which is 4.5% over base rate from its customers in the MSME segment. ?Our SME portfolio comprises of 20% of our loan book and stands at R46, 000 crore in absolute terms,? he added.

Another official of PNB said on condition of anonymity that the bank will wait for sometime to see how the other banks are behaving in the rising interest scenario before providing any kind of relief to its retail customers.

However, MK Nag, chief general manager and head, SME, State Bank of India (SBI), said that the bank is not looking at any relief to its MSME customers. ?Rather, we are waiting and watching until the end of September to take a call on how to provide relief to the customers . Still, we have a policy of providing some relief to those SME borrowers who have good ratings,? Nag said.

As of now, SBI?s SME portfolio amounts to R1.4 lakh crore comprising 22-23% of the bank?s total loan book.

?We want to maintain SME portfolio at 20% by the end of the financial year. Thus, we want to add another R25,000-30,000 crore to the portfolio by the end of the financial year. Our gross NPA in the sector is at 3%. It may not come down significantly in the rising rate scenario. Still, we would like to maintain it at the same level by the end of the financial year,? he said.

S Raman, CMD, Canara Bank, said in today?s competitive market, the bank cannot reduce the interest rate for its borrowers.

?But, we can think of providing relief on case-to-case basis,? added Raman.

Adopting a novel way, Union Bank is not charging additional rates. B Vara Prasad, general manager, MSME, Union Bank of India, said, ?We have adopted a cluster approach for our MSME customers, depending on the local area?s requirement.?

J Ramesh, general manager, SME, Bank of Baroda (BoB), said the bank considers on a selective basis if there is any scope of giving relief to its borrowers.

?Whenever we feel that that the track record of the party is good and he is maintaining long time relationship with us, then we do give some benefit to him. Normally, we charge an interest rate ranging between 13.5% and 14% from our SME customers.?

BoB?s SME portfolio comprises of R28,000 crore, which is 16% of its total loan book. ?We want to increase it to R33,000-34,000 crore by the end of the financial year. Our current gross NPA in the sector stands at 2.5%,? he said.