It?s the small and medium enterprises (SME) loan portfolio of public sector banks that is witnessing the most stress, and not the large and medium corporate accounts.
A report by HSBC Equities on asset quality revealed that 70% of SME debt is stressed, against 30% for large and mid-corporates. The report added that public sector banks are clearly more affected, with 10-20% SME exposure compared to 4-15% exposure for private banks. The report, that looked at around 5,000 corporates (half of which are unlisted), indicated that SME asset quality stress was most acute in the current downcycle starting FY 2011.
In case of PSBs, continued high SME lending growth and small loan sizes are likely to keep slippages elevated and recoveries difficult, said HSBC.
?SME stresses are likely to linger and recoveries seem difficult. This is particularly true for many PSU banks that continue to grow this book at elevated levels (average 18%). Private banks, have slowed SME growth to an average of 10%,? the report added.
Within PSU banks, SBI has the highest mix of mid-corporate and SME loans, at 33%, although PNB has the highest SME proportion, at 21%.
