CSB Bank to strengthen branch network to expand SME & LAP business, BFSI News, ET BFSI
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Shyam Mani, Head – NRI & SME, CSB Bank in a conversation with ETBFSI talks about how they’ve drawn their strategy to expand in the key SME hubs and extend credit and strengthen LAP portfolio.
As of June 30, 2021 the bank’s gross advances increased 23.71% to Rs 14,146 crore as against Rs 11,434.65 crore as of 30 June, 2020. Further its advances against Gold and Gold Jewellery accounts for 39.71% of the gross advances totaling to Rs 5,617.68 crore (increased by 46.16% on a Y-o-Y basis) as of June 30, 2021.
Hub & Spoke Model for SMEs
The bank is tapping SMEs with a turnover of Rs 250 crore and below excluding export turnover and up to ticket size of Rs 50 crore maximum. It has set up exclusive teams primarily to focus on leveraging existing branch distribution channels.
Mani said, “We have created a hub and spoke model and identified 42 key hub branches (or SME branches) and linked to 220 respective spoke branches, and the strategy is centered around the businesses in these specific catchments. Currently, we might not have large books in these areas but do have our presence like for e.g. Peenya, Bommanahalli in Bangalore and other SME markets like Delhi, Mumbai, etc.”
The demography in these branches are SME or business-led and where the bank’s SME assets will reside. Post identifying these areas they moved their key resources with teams working on relationship management and acquiring business and other team taking care of the portfolio. These branches are the bank’s primary funnel for our SME business.
He adds, “Beyond branch networks we also work with state bodies and industry associations. In each of these hubs, we have drawn connections to funnel for business. So the idea has been to identify and set-up distribution followed by prioritising our product offerings which are segment and ticket-size specific.”
The bank is creating scorecards by mapping segment, ticket size, and different parameters along with bureau checks to make quicker decisions. It also intends to simplify the process through technology and go maximum paperless as it progresses.
“Once all processes are in place from distribution to product offering to simple processes at par with peer banks, we are looking to complete the entire cycle of requirement of SME customers and build a good portfolio,” he added.
Mani has also observed that a lot of businesses are coming to India from different countries and is seeing an uptake in export-oriented businesses like auto ancillaries, engineering goods, etc. These companies are running with double shifts and are the ones who have built capacity and have large export orders.
Mani said, “We are focusing on recession-proof sectors and are particular about the sector we want to capture. Food-processing, healthcare, pharmaceuticals, engineering works, and specific markets which have export orders are some of the key sectors we are looking at. We don’t restrict our lending to top branches only, if there’s a requirement and an opportunity for a specific economy, we are able to take on their requirements as a lot of processes are centralised.”
Expanding LAP Business
CSB Bank is looking to strengthen their LAP offering by focusing on Top 10 cities to start with and do LAP business even within their SME presence.
Mani said, “Bombay, Delhi, Pune, Ahmedabad, Bangalore, Hyderabad, Chennai, Kochi, and Coimbatore are key markets for our LAP business. Within these markets, we have picked up top 60 branches having exclusive teams focusing on LAP disbursements on retail and large ticket size in parallel with SME business.”
He adds, “It’s an opportunity for us as we find a lot of NBFC business is moving into banks in terms of balance transfer because of two key reasons, one is pricing, and second, customer convenience. We are particular in handpicking cities because while our predominant distribution is in Kerala and Tamilnadu, nationally LAP is a potential business irrespective of your book size and distribution.”
The bank takes a combination of internal rating & external rating to take the credit calls.
He explains that they have to be careful of real estate prices and the stability of the market. “We are conscious about it and keep tracking the market from a risk perspective and have tied up with industry experts to gather inputs on market trends and take calls on industry and location-specific details,” he concluded.
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