Banks will discover the importance of SMEs: H R Khan

Banks will have to look to small and medium enterprises (SMEs) for improving their profitability and registering growth, even as public sector banks (PSBs) continue to battle the problems of poor recovery and stressed assets, Reserve Bank of India Deputy Governor H R Khan has said, according to a report posted on the website of the Federation of Indian Micro, Small and Medium Enterprises.

Delivering a lecture in Mumbai recently, he said, "Banks will discover the importance of the SME segment for profitability and growth and new models to serve the SME segment profitably will be found, as more than three-fourths of the segment is still waiting to be served." Referring to stressed assets, Khan said that PSBs continued to register the highest level of stressed advances, at 11.3 per cent of total advances as at end March 2014, followed by old private sector banks at 5.8 per cent.

Though the agricultural sector showed the highest gross non-performing assets ratio, the industry sector showed a distinctly high level of restructured standard advances, leading to the stressed advances of the industry sector reaching 15.6 per cent, followed by the services sector at 7.9 per cent as at December 2013.

There are five sub-sectors - infrastructure , iron and steel, textiles, mining (including coal) and aviation services - that had higher levels of stress and thus these sub-sectors/segments have been identified as 'stressed' sectors in banks' lending portfolios.

The share of these five stressed sub-sectors in the total advances of scheduled commercial banks is around 24 per cent. Infrastructure has the highest share (14.7 per cent) in total advances. Of the various bank groups, these five sub-sectors have the highest share at 27.3 per cent in the case of PSBs.