As large corporates are deleveraging and growth in the segment expected to be measured, the country’s largest private sector lender, HDFC Bank, is looking to leverage its distribution in non-urban markets and digital strengths in expanding its SME
Sashidhar Jagdishan, MD&CEO, HDFC Bank, in an analyst call organised by Jeffries, said SME
will be the fastest-growing segment over the next 3-5 years.
“We have had about 20 years of good track record in the SME
space. We are probably the second largest MSME
banker in the country, after SBI. But, even though we may pride ourselves in having had a fantastic book, we believe that with the kind of distribution we have, the digital offerings we have for the MSMEs, there is a great opportunity for us to expand further”, he said.
Jagdishan also said that as far as big corporates are concerned, the debt-to-EBIDTA ratios have been coming down, which is extremely important from a confidence perspective both, at the rating agency level and from a credit perspective. "With economic activity going up, we will see the good corporates in the right sector growing, but the pace of growth will be measured," he said.
Commenting on the impact of the second wave, Jagdishan said, "Going by what we are seeing at the ground level, I think it’s slowly starting to pick up from the complete paralysis that we saw over the last 30 days."
“From a near-term perspective, I don’t see any great shakes in terms of performance in the quarter. We are not too worried even if it’s a very tepid quarter. What I can see is the resilience, the buoyancy when things normalise,” he added.
On the client side, the bank is largely comfortable as 85 per cent of retail customers work with companies rated and above , where job losses have been low. SMEs were better prepared than in past, and larger corporations have better liquidity in their balance sheet.
“In terms of consumption, which will be a key indicator of economic activity, I see the upper-middle-class segment bouncing back and creating a surge in spending and driving consumption. But the middle and the lower-middle-class segment will be reasonably stable. They would want to recoup their savings. So, consumption on a mass basis will take some time,” Jagdishan said.
On the technology issues the bank has faced for which it was pulled up by the regulator, the management highlighted that it continues to work with the Reserve Bank of India (RBI) to resolve the issue and at the same time build more robust platforms.
“While tech-outages are a normal business risk for any bank/ financial company, bank could have built a system to ensure faster recovery here”, Jagdishan said.
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