Chary banks shun big biz, lend to small firms instead
May 12 2014 , Mumbai
Instead, domestic lenders are advancing more loans to small and medium enterprises and focusing on priority sector and retail lending as they wait for a turnaround in the economy.
Arun Tiwary, chairman and managing director of Union Bank of India, said: “SME, retail and priority sector advances will continue to be our focus areas. We are consciously staying away from making advances to large corporates as a prudent measure to avoid stress.”
Most lenders find it safer to lend to SMEs or retail customers. “In the fourth quarter, there was ample opportunity to lend, as companies had huge short-term requirements, but it would have raised our risk weight,” said an official with a public sector bank, which has stayed away from corporate loans.
M Narendran, chairman and managing director of Indian Overseas Bank, said, “Retail and SME sectors will be our focus areas. Retail advances form 10 per cent of our total advances now and we want to increase it to 35 per cent of the total loan book.”
Gross non-performing loans of the public sector banks are projected to have topped Rs 4 lakh crore in the financial year 2013-14.
Most private lenders are shying away from lending to the corporate sector. The ones making such advances are lending 30 per cent of the loans towards funding working capital requirements.
ICICI Bank, largest private bank, has seen its commercial business loans fall 17 per cent year-on-year in the March quarter, reflecting a slowdown in this segment and a rundown of its bought-out portfolio.