Despite slowdown, credit offtake up in small finance banks

Vijay C Roy

Tribune News Service

Chandigarh, September 16

The slowdown in economy has failed to dampen the spirits of small entrepreneurs, especially shop owners, agriculturists and MSMEs in the region. At a time when the credit offtake to big corporates and other sectors has slowed down, this sector witnessed a double-digit growth in the first five months of the current fiscal, according to small finance banks.

“It’s very difficult to generalise the entire economy by considering tardy growth in one sector. There is a lot of room for small-ticket loans. In the past five months of the current fiscal, we have managed to achieve our designated target,” said Sarvjit Singh Samra, MD, Capital Small Finance Bank.

“As on March 3, 2019, our loan book size was Rs 2,600 crore which has now grown to around Rs 3,000 crore. Similarly, the deposits have grown from Rs 3,667 crore to Rs 4,200 crore,” he said.

The bank has presence in Punjab, Haryana, Chandigarh and Delhi with 140 branches. Around 58% of the bank’s loan is below ticket size of Rs 25 lakh comprising agriculturists and MSMEs as clients.

Buoyed by the response from retail customers, the bank is planning to introduce vehicle loan for new customers.  Currently, the facility is available for existing customers only.

Govind Singh, MD & CEO, Utkarsh Small Finance Bank, said there is large number of small enterprises that are underserved and small finance banks are focusing on it.

“Lending to small businesses such as kirana stores, rearing dairy animals and setting up beauty salons present a huge opportunity,” he said. 

The banks’ credit and deposits have grown by 15-16% in the first five months of the current fiscal. The loan book size has risen between Rs 5,000 and Rs 7,000 crore during this period. Also, the deposits increased to Rs 6,500 crore from Rs 4,500 crore. 

These banks are still focused on microfinance business. Around 97% of their portfolio remains microfinance with a loan less than Rs 1 lakh. 

“We are gradually focusing on other retail assets such as MSMEs and affordable housing. We are also exploring loans for two-wheelers and second-hand vehicles for our microfinance customers,” he said.

The bank has 28 branches in Haryana and one in Chandigarh. It is also planning to add more branches in existing states and new branches in Punjab. Across the country, the bank has 449 branches, including in UP, Bihar, Maharashtra, MP, Jharkhand and Delhi.

Fuelling the demand 

• Sectors: Micro businesses, agriculturists, MSMEs
• Loan ticket size: Below Rs 25 lakh
• Purpose: To set up or expand business

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