HDFC Bank SME book doubles to Rs 1.48 lakh cr in under 3yr despite tepid credit flow

With a loan book of over Rs 1.48 lakh crore, HDFC Bank is the clear No. 2 in the SME lending space after the industry leader SBI. While system-wide lending to the SME sector has been tepid, HDFC Bank has clocked 19% incremental growth in the disbursal in the December 2019 quarter. It can be noted that SME accounts have been one of the worst hit for banks since the note-ban of November 2016 and the next shock of GST from July 2017. Private sector lender HDFC Bank doubled its SME book to over Rs 1.48 lakh crore by December 2019 from Rs 74,000 crore in March 2017, cornering over 9 percent of the around Rs 16 lakh crore market, at a time when credit flow to the segment has been tepid. According to the Reserve Bank of India (RBI) data, the system-wide SME loan book stood at Rs 15.7 lakh crore as of June 2019, up 10 percent over the 12 months' period. With a loan book of over Rs 1.48 lakh crore, HDFC Bank is the clear No. 2 in the SME lending space after the industry leader SBI which leads the segment with around Rs 2.7 lakh crore loan book and around 14 percent market share. During this period -- March 2017-December 2019, the bank added more than 3 lakh customer accounts -- from 30.74 lakh customer accounts to nearly 34 lakh accounts. While system-wide lending to the SME sector has been tepid, HDFC Bank has clocked 19 percent incremental growth in the disbursal in the December 2019 quarter, serving close to 3.4 million SMEs/MSMEs accounts, says a senior bank official. Nearly one-third, 30 percent to be precise, of these customers are in semi-urban and rural areas and come from all segments-manufacturing, services and exports, Sumant Rampal, the country head for business banking at HDFC Bank, told PTI in a recent interaction. And on the asset quality front, too, HDFC Bank -- which has the lowest non-performing assets (NPAs) in the system -- shines, with gross NPAs of 1.42 percent as of December 2019 and the net NPAs printing in at 0.48 percent. Refusing to quantify exactly the bad loans in his book, Rampal, who heads a team of Rs 1,700 relationship managers, said the SME book is not largely different from the bank's overall numbers. It can be noted that SME accounts have been one of the worst hit for banks since the note-ban of November 2016 and the next shock of GST from July 2017. From a geographical spread, 38 percent of the business come from the North, 29 percent from the West, 20 percent from the South and the rest from the East, he says. Growth of the SME book, which has a typical ticket size of Rs 5 crore and below, has been so fast it was only Rs 48,000 crore in March 2015, that jumped to Rs 72,000 crore in March 2017 and crossed the Rs 1 lakh-crore-mark in March 2019 to sniff at Rs 1.5 lakh crore by December 2019. And Rampal attributed this success to the way HDFC does banking-which is customised solutions and not products which includes a lot of cross-selling. He says his team, in fact, offers as many as nine products/solutions to most of these customers, which include insurance-life, general as well as health--trade finance, broking, advisory among others.