Micro, small and medium-sized enterprises (MSMEs) will thrive in 2023-24 (April-March) as the cash flow of these entities will receive a boost from activities driving the country’s economic growth, said Suresh Khatanhar, deputy managing director, IDBI Bank.
Micro, small and medium-sized enterprises (MSMEs) will thrive in 2023-24 (April-March) as the cash flow of these entities will receive a boost from activities driving the country’s economic growth, said Suresh Khatanhar, deputy managing director, IDBI Bank.
“This year will be good for MSMEs because of the economic development as we see – inflation coming under control, gross domestic product growing and more importantly, private and government investment is coming in. So, their cash flow is expected to improve. I see 2023-24 as an MSME year,” he said.
Khatanhar’s comments come at a time when experts have been keenly monitoring the MSME portfolio of banks and have cautioned on potential asset quality stress in the segment.
The bank’s gross non-performing asset ratio fell 1,378 basis points year-on-year to 6.38% as on March 31. IDBI Bank is focused on bringing down its bad loans in the run-up to the strategic disinvestment by the government and Life Insurance Corporation of India. As on March 31, the promoter group held a 94.7% stake in the bank.
As a part of its balance sheet clean-up, the bank has gradually reduced its exposure to corporate borrowers. Currently, 69% of the bank’s loan book is retail and the remaining 31% is corporate. Going ahead, it plans to keep its retail mix at around 60-65% of the overall portfolio.
“On the retail side, we are looking to realign our focus on the credit card vertical and capture this market. We are putting in a digital acquisition journey whereby we are able to acquire more customers. That will also help in our cross-sell business,” Khatanhar said. “Our disbursements on automobile loans will go up this year. On the corporate side, we continue to engage with the best corporates in the country and we are not averse to any sector. It is only quality that matters.”
The bank’s net interest margin rose 104 bps YoY to 5.01% in January-March. The NIM may get compressed by 25-30 bps in 2023-24 as deposits get re-priced. “Some correction will happen (with the lag effect of deposit cost coming in). I personally see a compression of 25-30 basis points on the larger side. The effect will play out over the course of a year as deposits mature and re-pricing happens,” Khatanhar said.
