MSMEs to drive growth for banks, more pain expected on corporate front: BCG-Ficci
Mumbai: Banks’ dependence on large corporates for growth, which is already on the wane, will become thinner going forward and […]
Sarabjit Kaur November 13, 2017
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Mumbai: Banks’ dependence on large corporates for growth, which is already on the wane, will become thinner going forward and lenders will have to find growth with small businesses, says a report. “When it comes to advances, MSMEs will be the key growth-driver for banks, thanks to the formalisation of the economy. While retail will lose steam and stabilise at the current levels, more pain is expected on the corporate loan front,” says a BCG-Ficci report. According to Saurabh Tripathi, senior partner and director at BCG India who authored the report, large and mid- corporates who today bring in 39 per cent of lending revenue to banks will bring only 27 per cent by 2022. This is because large ticket credit is moving to wholesale markets even as in the short-term banks are challenged by the lingering bad debts in corporate segments. “As high rated borrowers switch to capital markets, banks will be left with lesser rated clients on their books and will require sharper credit processes. Corporate banking will have to be much more working capital and transaction- oriented,” he says. On the other hand, “SME credit will grow from the present 20 to 25 per cent of the lending revenue mix for banks. This will be driven by substitution of informal credit triggered by GST, increasing digital payments and rising sophistication of surrogate data-based credit analytics.” Though retail credit growth, which has been the mainstay of banks for the past many years, has been steady, it’s expected to stabilise at the current levels with penetration reaching high levels in certain segments/select geographies and slower new-to-credit customer growth.