Big banks now want small business customers


There was a time when big banks use to discourage opening of accounts by smaller companies. They were asking any small firm approaching them to comply difficult terms and conditions.

After retail, it’s the SME (small and medium enterprise) sector which has turned attractive for banks. Citibank is the latest to enter this segment, targeting small businesses and professionals.

Citibank, Head of new business said that the small and medium enterprises (SME) segment has always been a neglected community though its base is strong with 3 million borrowers. Like many other private and public sector banks Citibank wants to woo these customers with a special focus. Public sector banks are asked by the government to be aggressive in lending to SME.

Citibank wants to target all units which have a top-line of up to 10 million dollars and says these customers would be treated like retail customers with relationship managers. Relationship managers are being appointed by Citibank to cater to the different needs of small businesses.

Though the SME segment has been growing at a higher rate of over 30% compared to large corporate Companies growth rate of 20-25%, access to finance has been a tough task for a large number of SME. These companies are still forced to borrow above PLR (prime lending rate) in most instances.

Bankers complain that lack of transparency in financial reporting has been one of the hindrances which forces banks to charge higher interest rates.

Despite these shortcomings, the SME segment has turned an attractive pool for the banking sector because of their recent performance. In fact, even State Bank of India is understood to be eyeing this sector during the current financial year.

A number of other banks too have stepped up the focus on this segment in recent times. The entry of fresh lenders (banks) could be good news for SME borrowers who are forced to pay 3-4% higher interest rates compared to large corporate companies.

SME have now become smart to negotiate interest rates with the banks at the time of borrowing. Which ever bank is giving them at the lowest rates of interest the SME are opening their account and other banking transactions with them. Banks now have to use all their marketing skills to retain a SME Customers.