SMEs lending generates net profit growth for banks

New Delhi, Apr 24 (KNN) Country's top banks namely YES Bank, Corporation Bank and Allahabad Bank earned their interest incomes by providing loans to the small and medium enterprises (SMEs).

Private sector lender YES Bank has increased its net profit growth by 18.79 per cent in its fourth quarter accelerated by lending money to this sector, said a report.  The bank earned a profit of Rs 430.2 crore for the quarter ended March 31, 2014.

The growth was boosted by a 12.8 per cent year-on-year rise in net interest income (NII) to R 719.6 crore and the bank’s net interest margin (NIM) increased 10 basis points to 3 per cent in quarter 4.

Asset quality improved marginally and gross non-performing assets (NPAs) decreased from 0.39 per cent of gross advances in Q3 to 0.31 per cent of gross advances in Q4.
Mid-sized corporate lending accounted for 15.5 per cent and branch banking, which includes retail and MSME lending, accounted for 21.2 per cent of the advances.

Total advances were up 18.4 per cent year on year at Rs 55,633 crore in the fourth quarter. Large corporate lending accounted for 63.3 per cent of the advances portfolio.

Meanwhile, Corporation Bank opened an SME loan centre in Ludhiana. SME clusters, such as auto components, hosiery, machine tools, hand-tools, forging, and bicycle parts in the region will benefit from this initiative.

In order to encourage and meet the financial requirements for micro enterprises (both in the manufacturing and service sector) all over the country, the public sector banking company has launched a special campaign, “Corp Micro Plus” till end of March 2014 with rate of interest at base rate (presently 10.25 per cent) and no processing charges, according to a statement.

As on December 2013, the SMEs portfolio of the bank stood at Rs 23,069 crore with year-on-year growth of 31 per cent.

In the meantime, state-owned Allahabad Bank has registered a growth of 7 per cent in the last financial year.

Chairman and Managing Director Rakesh Sethi said that in the absence of takers of any corporate credit, the bank was focusing on farm credit, retail and the MSME sector.
He said that the bank will raise Rs 320 crore from the market through QIP once the government approval was accorded to it.

As per the MSMED Act, 2006, banks were advised to achieve a 20 per cent year-on-year growth in credit to micro and small enterprises, a 10 per cent annual growth in the number of micro enterprise accounts and 60 per cent of total lending to MSE sector as on preceding March 31 to micro enterprises.