Private sector lender HDFC Bank is targeting to double SME loan portfolio over the next four years by using digital technology and deepening its network to more non-metros areas.
"Our SME book stood at Rs 70,000 crore as of March 2016 and we are targeting to double our exposure," its head of business banking, Aseem Dhru, said, after the bank launched a complete suite of digital for SMEs.
SMEs constitute 18 per cent of its overall book as of March, Dhru said.
He said the bank, which accounts for 7 per cent of the market share when it comes to financing small businesses, will also grow its market share as it has been growing faster than the market.
A majority of lenders have been facing problems with SMEs on the asset quality front, but Dhru said the bank has not been surprised negatively. HDFC Bank chooses a borrower on the basis of track record and does not have any aversion either sectorally or geography-wise, he said.
It registered a loan growth of over 30 per cent for SMEs, which it defines as those having a turnover of up to Rs 200 crore, as against a 20-22 per cent overall credit growth for the bank and high single digits credit growth in system.
At present, the bank has a relationship with 1 lakh of the 3.6 crore SMEs in the country and wants to increase its share by expanding into newer geographies.
The share of non-metro areas has gradually grown to constitute 65 per cent of the customers, Dhru said, adding that this will definitely grow.
The bank also launched a digital offering for the SMEs through which the small businesses will be able to do all its banking transactions online.
Dhru said in the next 12 months, HDFC Bank is targeting to do 60 per cent of the banking transactions on the receipts, payments and forex fronts to be done using the digital alternative.
He said this will definitely have a cost advantage but declined to put a number for it, saying it will take up to a year to assess the benefits.
Dhru said among other things, the new product suite will eliminate the need to have a cheque book as well.
Convinced that usage will increase only when the SMEs try the new product, the bank will be relying on its field staff to spread awareness about the advantages of the new offering by explaining the convenience to the clients, Dhru said.
It had been carrying out a pilot on the project for the last three months and has spoken to 300 SMEs till now in the development stage, he said.