Suddenly Creditworthy ; Small and Medium Enterprises, Long Treated by Bankers As Step- Children, Are Now Being Wooed by Almost Every Bank Worth Its Name. And Things Are Expected to Get Better with Each Passing Day.

Summary

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How the times have changed. Barely five years ago, if one had asked a banker to advance a loan to a small and medium enterprise (SME), chances were that he would try and find some way to wriggle out of it. Ask him now and he'll jump at the opportunity of "building a new and mutually beneficial relationship". Yesterday's pariah is today's sought after princess. The post-reforms Indian economic landscape is filled with instances of ugly ducklings turning into beautiful swans and vice versa, but seldom has banking sentiment towards an entire segment-spanning almost the entire industrial spectrum-shown such a dramatic and broad-based turnaround.

The reason is simple: there's lots of money to be made from SMEs. Cherian Varghese, Chairman, Union Bank, says the SME portfolio of the banking sector as a whole gives 1-1.5 per cent higher returns than the more pampered large corporate segment. "The SME segment is seriously profitable; in absolute terms, it gives margins of 2-2.5 per cent," concurs Vijay Chandok, General Manager, Small and Medium Enterprises, ICICI Bank.

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Suddenly Creditworthy ; Small and Medium Enterprises, Long Treated by Bankers As Step- Children, Are Now Being Wooed by Almost Every Bank Worth Its Name. And Things Are Expected to Get Better with Each Passing Day.

The country's largest bank, the State Bank of India (SBI), already has an SME portfolio of Rs 80,000 crore; and it's growing at an annual rate of 38 per cent. "Given the size of our exposure to the SME segment, that's massive. At this rate, we'll add another Rs 1,00,000-crore of SME assets over the next three years," says a top official of the bank. At the lower end of the profitabil...

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