The Hindu Business Line : ‘SME lending can be profitable’

Mumbai, Nov 27 The profitability of credit to small and medium sector (SME) should be tapped by the commercial banks in India in an aggressive manner, according to Mr J Andrew Spindler, President and CEO, Financial Services Volunteer Corps (FSVC), New York. “I think the potential of SME lending has not been rightly understood by banks here. They need to go beyond the mandatory SME lending (as per Government guidelines) and should lend on their own significantly,” Mr Spindler told Business Line here on the sidelines of BANCON 2007.

On a notion that SME lending may lead to more NPAs for the banks, the chief of the global consultancy and advisory body said NPAs in SME lending in India were more due to lack of good business practices than blues in the sector.

“In a small country like Sri Lanka, Citi Bank is reaping the fruit of prudent lending to SMEs. Same is the case with the US. I don’t see any reason why SME lending could not be profitable here.”

On the modalities of lending, Mr Spinlder suggested that adoption of better scoring methods, checks and balances on marketing staff and case-to-case decisions on sanction of loans. “A differential and custom based approach will help”

FSVC will take up a host of initiatives in India to promote SME lending. “We have just received a grant for taking up SME lending initiatives in India and we will soon announce the measures to be taken,” he said while declining to disclose the figure of the grant.

The non-profitable organisation is also working on collaborative efforts to augment SME lending. “We had already spoken to Bank of Allahabad, Union Bank of India and UCO Bank a couple of days ago and are in talks with State Bank of India and Punjab National Bank,” he said. FSVC would be teaming up with Indian Institute of Finance and Banking and the training institute of State Bank to conduct training programmes on SME lending.

The FSVC is a not-for profit, public private partnership with operations inacross the world.

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