Lakshmi Vilas Bank ropes in McKinsey to double MSME loan book by fiscal 2020
Mumbai: While most banks have been cautious on their small businesses following demonetisation, Chennai-based Lakshmi Vilas Bank has chalked out a strategy to revamp its micro, small and medium enterprises (MSME) business in an effort to double its book to Rs10,000 crore by fiscal 2020, according to a top official of the bank.
Parthasarathi Mukherjee, managing director and chief executive officer, said the bank has roped in McKinsey for consultation on strengthening and reorganising the MSME business, especially in the southern region, the bank’s stronghold.
Currently, the MSME loan book of the bank is above Rs5,660 crore, over 87% of which comes from the southern market. Banking sector’s outstanding MSME loans are at Rs4.62 trillion, according to the latest data available with the Reserve Bank of India.
Mukherjee said the bank started by serving the needs of small businesses but over time its focus somewhat drifted. With this exercise, the bank expects to gain better traction through faster loan processing and improved underwriting standards, among others.
“The aim of the exercise is to gain market share and better connect with our clients not only for their funding requirement but also offer other solutions such as risk advisory, insurance, forex solutions, etc.,” he said, adding many SME clients have banking relations with the lender for more than 10 years.
According to Mukherjee, Lakshmi Vilas Bank has exposure to a wide range of SMEs but being a South India-focused bank, most of the clientele is from the textile sector. He added that delinquencies in the MSME portfolio are low despite some disruption seen after demonetisation.
“Along with MSME, we are also aiming to get some retail business because we will try to understand and serve the personal needs of these entrepreneurs,” he said.