CSB Bank targets 32% growth in SME vertical by end of FY24, says top executive

Mani said that after a RBI directive, banks increased their risk weight on personal and other loans. Hence, banks will go aggressive and see tight competition in lending to SMEs.

Private sector lender CSB Bank is targeting a 32 percent growth in the small and medium enterprises (SME) segment business for financial year (FY) 2023-24, said Shyam Mani, Group Head, SME.

“In the past few quarters, the bank has been registering an average growth of 20-25 percent in our SME business. In Q2FY24, our SME segment grew by 22 percent. By the end of FY24, we are targeting a 32 percent growth,” Mani said.

In addition to this, Mani said that partnerships with local trade bodies and fintechs have worked well for the bank. “These partnerships have worked well for us and we are now looking at expanding our existing business in Delhi, Pune, and some other parts of Maharashtra,” Mani added.

Also read: Bank credit to industries slows down, shows RBI data

Currently, the bank’s SME book stands around Rs 2,377 crore, which is about 11 percent of the total loan book.

Industry growth

Lending to industries, which include micro and small, medium and large, dropped to 5.9 percent in October 2023, compared to 13.5 percent in October 2022, the Reserve Bank of India's (RBI) latest sectoral credit data showed.

Small industries grew 16.9 percent in October 2023, compared to 20.2 percent in October 2022. In absolute terms, credit to micro and small industries stood at Rs 6.83 lakh crore in October 2023. The same in the corresponding period last year was Rs 5.84 lakh crore. In October 2021, it was Rs 4.86 lakh crore. For medium industries, bank credit grew at 12.1 percent in October 2023, versus 29.6 percent in October 2022. In absolute figures, credit in October 2023 stood at Rs 2.8 lakh crore versus Rs 2.5 lakh crore last year.

Mani said that, in the past few quarters, some lenders saw a muted growth and asset quality in SME lending. Going ahead, he added that lending will pick up in the October-December FY24 quarter, with segments like medium enterprises and solar financing receiving further boost.

“For CSB Bank, SME finance has been a flagship product and a key segment in overall growth. We have been focusing and growing aggressively in SME finance for more than one year,” Mani said.

Additionally, the role of fintechs, Mani added, has been crucial to take lenders to different geographies and new customer segments. “Our fintech partnerships have been a key factor in mitigating risks and growing our business,” Mani said.

New RBI norms

Mani said that after a RBI directive, banks increased their risk weight on personal and other loans. Hence, banks will go aggressive and see tight competition in lending to SMEs.

“We see that banks will go aggressive in lending to SMEs as there is a great demand in the segment,” Mani said.

Mani said that NBFCs, in particular, will have an impact on their cost of funds due to the rise in risk weights. “They will see some impact on their cost of funds due to the rise in risk weight. They will look at other sources of funds in addition to banks,” Mani added.