CHENNAI: Tamil Nadu-based lender Karur Vysya Bank (KVB) has shifted its focus on commercial lending to traders and micro, medium and small enterprises to reduce risk and get better returns, a senior executive of the bank said.
The corporate lending portfolio of the bank has gone down to 21% at present from 40% five years back. Loans exceeding Rs 25 crore are categorised as corporate loans and lending below that as commercial loans. “We have shifted our focus from corporate to commercial lending in the last two years and we are succeeding in that. Our commercial portfolio is 32%-33%.
The reason is many MSMEs and traders need credit and we’re focusing on them,” B Ramesh Babu, managing director and chief executive of the bank said.
At a point of time five years back, KVB used to focus on big-ticket advances of about Rs 50 crore and Rs 300 crore, but we realised it is better to granualise the portfolio to get better interest rates and the ability to withstand losses in cases of default. However, he clarified that KVB will lend to corporate customers up to 150 crores and more in partnership with other banks based on the situation.
Currently, KVB’s retail agriculture and MSME loans constitute 78% of the loan book. Over 77% of the bank’s deposits are below `1 crore and its top 20 depositors form 5% of total deposits. Responding to a question about whether the bank can achieve scale with a granular portfolio compared to its peers, Ramesh Babu said the banks have to strike a balance and steady growth is much better than overnight growth in topline.
“Rate (of interest) for large corporate loans is higher and we can get better profits in `2 crore advance and our retail advances have grown 16% last year.”