The Hindu Business Line : Foreign, pvt banks shy away

Hyderabad, Aug. 21 Even as many public sector banks are focusing on lending to small and medium enterprises (SMEs), the foreign and private banks are shying away from it due to some concerns in the due diligence process.

Mostly, these banks are focusing only on offering services and working capital needs through factoring services and warehouse receipt financing but not on term loan products for capex requirements of SMEs.

“Our term loan products for SMEs are very attractive in other countries. But here, the data is a big problem. In addition, there is very poor corporate governance, no succession plan in family-owned businesses, and getting collateral is nearly impossible,” Mr Bhuvnesh Khanna, Head of SMEs Commercial Banking, HSBC India, told Business Line in an interaction here.

“It is easier for the banks to monitor regular trade transactions which will liquidate by themselves,” he observed.

The SME bodies also feel that obtaining a credit line from private banks is equally tough. “This is a near impossibility,” points out Mr Gurumurthy, Project Manager (SME Financing and Development Programme), German Technical Corporation (GTZ).

He said that the largest private bank in the country had only 2 per cent ofits total loans in SME sector while earning as much as 16 per cent of its fee income from this sector. He felt that private banks must come forward to finance SMEs as a social obligation.

More Stories on : Credit Market | SSI | Private Banks | Foreign Banks

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