Kotak Mahindra Bank aims to be a full-service provider and not just a lender even as it is focusing on SME and mid-market segments for growth, a senior official said.
“We want to grow sensibly. We do not want to be loan junkies. We want to give a loan and we also want customers to do transaction banking with us. He should use the products and services of our bank. We want to be a holistic solution provider and not just give him a loan. That’s no more profitable for a bank,” said Paritosh Kashyap, President & Head of Wholesale Bank at Kotak Mahindra Bank.
Highlighting the shift from traditional lending to a more holistic approach, Kashyap stressed on the importance of comprehensive banking solutions.
He said on the loan side the bank will go aggressive on growth, and while giving loans it will also push for other products. “We want customers to do cash management with us, and trade with us. If he has a remittance or import collection of exports, he should use our bank. His employees should have a salary account with us. So I want all of these services as a bank, I don’t want to be only a lender. I want to be a full-service provider,” Kashyap said.
He said loans can be given by anyone as long as the corporation has a good credit quality. But customers will come to a bank if we provide a holistic solution, better service, better technology platform, better products, he said, adding that “banking is a lot more than lending. It has changed substantially.”
SME and MSME focus
On the bank’s focus on SME and MSME segments, Kashyap said with conglomerates, large corporates, and SME and mid-market, the market is far larger. “Because SME is a granular segment, we believe from a risk perspective that piece has lower risk. If the country is going to be 10 trillion dollars in the next four or five years, this segment will grow faster than the top layer. So we want to be with them.”
He said the assets are small ticket sizes and if one goes bad, it doesn’t impact the larger. “Generally in wholesale banking if a Rs 200 crore asset goes bad, it impacts the people. But if Rs 10 crore goes bad it really doesn’t impact much. You can keep doing business. So your risk of losing something is granular and it is diffused,” he said, adding that a large part of these loans are also secured.
On challenges in SME lending, he said because everyone wants to grow and demand for credit is a little lesser than the urgency of lenders to give money. “This mismatch is leading to irrational pricing in both mid-market and SME. So, I think there is a certain amount of exuberance in that segment. And in that segment, from a pricing perspective, I guess, once some of the larger banks, realise that the cost of funds has gone up. I think people will come back,” he said.
Credit growth trends
Discussing the current credit growth, particularly in the infrastructure sector, Kashyap said the credit growth is increasing in pockets. Infrastructure is increasing substantially because of government spending. “Now, infra as a segment also, gives a lot of impetus to downstream industries, like cement, and steel, which also leads to employment and consumption. Also significant growth in real estate. A lot of expansions in chemicals as well. Growth in credit has been reasonable.”
On the dynamics of credit growth for Kotak Mahindra Bank, Kashyap “For different people, the growth depends on their size. Even if Kotak grows at 20%, we would not find it difficult to grow because we are very small from our base. Hence a 20% growth is not too large for us. But for someone who is already at 25% of the market share, for him to grow at 20% may be a little more challenging.”
Digital initiatives
Kashyap also spoke about Kotak’s digital platform, FYN, designed to enhance corporate banking services. “We have launched a digital platform called FYN, where corporates can come onto the platform. Account services, which is corporate currency. To see all multiple accounts. One may have in the banks, they can see where all balances at one place can do we don’t check statements or whatever.”
He said there is a huge range of transaction services, remittances, and other things which can be done on the portal. “We are pushing a lot more customers to come on the portal and use the services, which effectively will improve their productivity as well as ours.”
Focus areas and strategy
Looking ahead, Kashyap outlined Kotak’s key focus areas, “We are very keen to grow our trade, so the trade book will increase essentially. We’ll do more trade inland and offshore, both from the domestic balance sheet as well as our GIFT City balance sheet. We want to really invest heavily in trade.”
Summarising the bank’s strategy, he said, “One is product-led. Structured lending in the product, then segment-wise. We are growing mid-market and SME, which is a product. Second is segment, which is mid-market, that’s the focus area. Third is digital solutions.”
