A cautious ICICI Bank, which is seeing signs of concern in funds it receives from small and medium enterprises, has decided to slow its lending to the sector for the remaining part of the fiscal year.
Speaking at a banking seminar organised by the Federation of Indian Chambers of Commerce and Industry, Vijay Chandok, senior general manager and global head, SME at ICICI Bank said, “There is stress in the SME portfolio. The flow of money from large companies to small ones is becoming slower. We are seeing lengthening of receivables. Credit cycles are becoming extended. If we see lengthening further, then we will have to restructure… infuse liquidity and restructure the debt.”
In other words, the bank may focus on extending the payback period of existing loans than offer more to existing or new borrowers.
“We are monitoring our lending rates on a daily basis,” Chanda Kochhar, joint managing director, ICICI Bank, said. “As of now, stability has come back to the system but the deposit rates have not fallen. The cost of funds has not fallen.” The SME loan-book is 2 to 3 percent of the total advances of ICICI Bank.
“IT companies had large dependence on BFSI (banking financial services and insurance) sector, which have slowed down. We are now shifting focus to other industries such as manufacturing,” Chandok said.