LIC-backed IDBI Bank is diversifying into new segments such as equipment finance for healthcare professionals, warehousing loans, and trade-bill discounting for AAA-rated corporates, as rising input costs and disproportionate increases in lending rates raise concerns about worsening credit quality in the MSME book.
“On the MSME front, we are looking at risk-mitigated products to help control slippages,” Suresh Khatanhar, DMD, IDBI Bank, said. “We have developed products for doctors, and equipment finance where delinquency levels are relatively low. We are also focused on warehousing loans where we are backed by the pledge of goods. Discounting of bills / TreDs is another strong segment where we have only top-rated customers. We have also built specific products for traders and manufacturers, so these kinds of businesses will be the focus going forward as we build a more granular portfolio.”
The bank already has a bill discounting book of Rs 900 crore. For the current fiscal year, it plans to boost overall credit by 10% to 12%. An increase in areas like steel, infrastructure, and auto, according to Khatanhar, will help ancillary MSMEs in these sectors.
MSME advances accounted for 14% of the entire loan book, which was at approximately Rs 1.45 lakh crore at the end of March 2022.
The bank also intends to expand its co-lending portfolio aggressively. UGro Capital, Adani Capital, and Electronica are among the four NBFCs it has onboarded for co-lending to MSMEs.
“The positive side is we can cherrypick good assets. We are working with our IT department to build straight-through processing so that we can process all these transactions seamlessly,” Khatanhar said. “I see good traction for this segment and we are looking to build a book of Rs 300 crore by the end of the fiscal. If things go as planned we will consider tying up with gold loan and housing finance NBFCs.”
The co-lending concept seeks to provide the best interest rate and reach the borrower. MSMEs benefit from such collaborations since they can get customized solutions faster.