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MSMEs to be next growth driver for bank as corporate credit to give pain

Because the proportion of customers with two or more loans and availing a third one went up from 34% in Q2 of 2015 to an estimated 44% in Q2 of 2017

Press Trust of India  |  Mumbai 

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Banks' dependence on large corporates for growth, which is already on the wane, will become thinner going forward and lenders will have to find with small businesses, says a report.

"When it comes to advances, 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-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 will bring only 27 per cent by 2022.

This is because large ticket is moving to wholesale markets even as in the short-term are challenged by the lingering bad debts in corporate segments.

"As high rated borrowers switch to capital markets, will be left with lesser rated clients on their books and will require sharper processes. Corporate banking will have to be much more working capital and transaction- oriented," he says.

On the other hand, "SME will grow from the present 20 to 25 per cent of the lending revenue mix for This will be driven by substitution of informal triggered by GST, increasing digital payments and rising sophistication of surrogate data-based analytics."

Though retail growth, which has been the mainstay of 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-customer

While smaller ticket borrowing has proliferated in consumer durables and gold loans, the share of under-35 borrowers among new borrowers grew from 25 per cent to 40 per cent between 2013 and 2017. But this is unlikely to continue the momentum, he warns.

Because the proportion of customers with two or more and availing a third one went up from 34 per cent in Q2 of 2015 to an estimated 44 per cent in Q2 of 2017.

But cannot hang their hats only on retail though it is reaching its limits. "Data shows that certain states have reached the OECD levels of bureau penetration with Kerala at 61 per cent while only states are lagging."

Thanks to data availability, the quality of bureau infrastructure in the country is rated higher than that of OECD countries by the World Bank and is now reaching coverage of over 40 per cent.

Calling up on to treat data as a strategic asset and prioritise technology investments to consolidate and monetise data, the report says leveraging data can add a whopping Rs 3 trillion to banks' bottomline over the next five years as sit on the highest amount of consumer data per unit of revenue earned than any other industry.

"Using data in every component of the banking business can add cumulatively Rs 3 trillion to the bottom line over next five years, which is almost 0.4 per cent of incremental annual return on assets. This hidden treasure can help them build a healthy balance sheet and business model," he says and describes data as a 'Brahmaastra' that can really unleash unprecedented value for

On NBFCs which have been of late heavily eating into share of loans, he says their share grew from 15 to 20 per cent of disbursement between 2014 and 2017, while NBFCs' share in new loan account opening grew from 21 to 44 per cent in the same time frame, reflecting their predominance in smaller ticket consumer durables, two-wheelers, small businesses and gold

Saying that could be the new driver, he says though there over 50 million in the country and over 40 million current accounts from them, we have only 4.5 million unique borrowers from the formal industry.

First Published: Sun, November 12 2017. 18:32 IST