Axis Bank’s SME business records 6% de-growth in FY20

Private lender Axis Bank’s small and medium enterprises (SME) business saw a de-growth of 6 percent for fiscal 2020 as the bank focused on maintaining asset quality in the segment, the bank said in its latest annual report. The Bank’s SME advances stood at Rs 61,921 crores as on March 31, 2020, and constituted 11 percent of its total advances.

“During fiscal 2020, given the uncertainties on the macro-economic front and the underlying weakness in the economy, the Bank had maintained a cautious stance on SME space,” the bank said in its annual report.

SME industry has faced stress in a slowing economy. The Covid-19 lockdown added to the woes of the segment. Many SMEs have shut shop since March due to lack of demand and liquidity stress. Banks too have adopted a cautious stance while lending to SMEs fearing future loan defaults.

"The nationwide lockdown to contain the spread of coronavirus - which has been extended for the third time, until 31 May - has taken a severe toll on businesses, supply chains and individual incomes. The impact for many micro and SME sectors is structural, a meaningful revival is unlikely even when the lockdown ends," Fitch Ratings said in a note last month.

"We assume that both consumer demand and manufacturing are likely to remain tepid... The stress is occurring across sectors, but SME and retail are likely to emerge as higher risk due to both stressed industrial activity and rising unemployment," the agency said.

However, banks have resumed lending following the launch of government-guaranteed Rs 3 lakh crore MSME loan scheme by Union finance minister, Nirmala Sitharaman early this year. Under the scheme, banks have so have disbursed around Rs62,000 crore and sanctioned around Rs 1.2 lakh crore loans. Public sector banks have disbursed Rs 38,372 crore loans while private sector lenders have disbursed Rs23,615 crore.

At the same time, during fiscal 2020, Axis Bank’s corporate loan growth was up 11 per cent over fiscal 2019. The Bank’s domestic corporate loan book growth was strong with a Y-o-Y growth of 13 per cent, it said.

Retail banking

Also, Axis bank has grown its retail lending portfolio over the last decade with a compounded annual growth rate (CAGR) growth of 31 per cent over the last 10 years and currently stands at Rs 3,05,400 crores as on March 31, 2020, up 24 per cent over last year, the bank said in its annual report.

The Bank continued to increase its share of retail loans to total advances, which stood at 53 per cent as compared to 50 per cent last year.

According to the bank, while it has significantly diversified the book over the years in terms of product offerings, the book continues to remain largely secured at 80 per cent of the book with home and mortgage finance, automobile finance and loans against property being the major components of the Bank’s retail lending portfolio, it said.

These three segments constitute 35 per cent, 13 per cent and 9 per cent, respectively. The proportion of higher-yielding Retail Lending products comprising mainly of Personal Loan, Credit Card and Small Business Banking (SBB) stood at 22 per cent as on March 31, 2020.

“The growth of retail and consumer lending in India has been a consequence of growing affluence and changing consumer behaviour. Retail Lending is one of the Bank’s core growth areas,” the bank said in its annual report.

As on March 31 2020, Bank had average priority sector lending (PSL) achievement of 41.77 per cent for fiscal 2020. PSL loans refer to loans to economically weaker sections, which banks have to comply with according to RBI guidelines. The Bank has also been buying PSL certificates (PSLC) to narrow the gap between achievement and RBI mandated targets in the sub-segments. During fiscal 2020 the Bank purchased PSLCs of an aggregate amount of Rs48,321 crores at a cost of Rs611 crores, it said.

Payments business

In FY 20, Axis Bank sourced 45 per cent of credit cards through paperless digital platforms. The Bank said its focus continued on affluent segment helped improve Affluent Credit Card sourcing mix to 12 per cent of overall volumes in fiscal 2020 as compared to 9 per cent for the previous year.

As on March 31, 2020, Axis Bank has a debit cards base of 24.51 million. The debit cards portfolio has seen an increase of 15 per cent in spends from Rs44,610 crores in last year to Rs51,516 crores.

Similarly, Axis Bank’s merchant acquiring business has a base of 5.22 lakhs installed terminals of which 3.08 lakhs terminals are enabled for accepting contactless payments, it said.

Assets under management under Axis Bank’s Wealth Management business ‘Burgundy’ grew to over Rs1.47 trillion as at the end of March 31, 2020. “Since its launch in 2014, the wealth management business has diversified to reach over 1.6 lakh customers, it said.