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ICICI Bank upgrades digital services for MSMEs; to maintain “risk-calibrated growth” approach in lending

Executive director Anup Bagchi said banks may soon start to lend to MSMEs based on their cashflows and not on their solvency, thanks to the rapid adoption of digital services.

April 28, 2022 / 06:30 PM IST

ICICI Bank has upgraded its online banking services under an upgraded digital ecosystem built exclusively for small businesses including those that are customers of other banks.

Small businesses from other banks can log in as guests to get instant and paperless overdraft facility of up to Rs 25 lakh and open current accounts digitally. Users should download the new version of the InstaBIZ app, the lender said.

“Named ‘InstaOD Plus,’ the industry-first proposition enables customers of any bank to avail of an overdraft instantly through a few clicks either on the new version of InstaBIZ or on the corporate internet banking platform,” the lender said on April 28. “Customers of ICICI Bank can activate the OD in their current accounts instantly while customers of other banks can do so after opening a current account with the bank digitally through video KYC.”

MSMEs buoyant
ICICI Bank executive director Anup Bagchi told reporters that while some micro, small and medium enterprises (MSMEs), especially those operating in contact-intensive sectors, had been impacted during Covid-19, the overall health of ICICI Bank’s MSME customers remains buoyant.

“Our portfolio is looking very good. Yes, there are certain parts of MSMEs which got deeply impacted… But that is opening up quite nicely,” Bagchi said.

Most companies in the bank’s MSME portfolio are now at pre-Covid levels, he added.

ICICI Bank’s loans to small and medium enterprises (SME) rose 34 percent to Rs 40,450 crore at the end of March. SME loans accounted for 4.7 percent of the bank’s overall advances, which climbed 17 percent to Rs 8.59 lakh crore.

Asked whether the bank’s risk appetite in the MSME sector was increasing, Bagchi said though risk appetite is high, the objective is to achieve risk-calibrated growth.

He said during Covid-19, MSMEs became more efficient in terms of resilience and cashflows and the good ones became better. The businesses that suffered were large MSMEs that were overleveraged, although some of them have started performing well after restructuring their loans.

Bagchi said another key difference that is visible and should become a trend is lending to MSMEs based on their cashflows and not on their solvency. He said solvency-based MSME lending created many issues but with the rapid adoption of digital services, there are many high-frequency data points that a bank can use to lend on the basis of cashflows.

Asked about the growing competition from fintechs, Bagchi said: “That is a question that they have to answer more than we have to. They have to figure it out. Let them make a comprehensive app like this because they can’t lend, they can’t do instant, they can’t do many things.”

He said it was for fintech companies to demonstrate how they will be relevant.

“We are already relevant. We will become more relevant and we will learn from them because they are also doing some fantastic stuff,” he added.

Piyush Shukla
first published: Apr 28, 2022 06:19 pm