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Banks turn attention on SME sector

CHENNAI: Despite global recession, the SME (small and medium enterprises) sector in the Asia Pacific region is witnessing aggressive growth in exports and SMEs, particularly in India, are highly optimistic about their business potential.

This sector in India contributes nearly half of the country’s total exports. Sensing this behaviour, many public and private sector banks have turned their attention to this sector.

Addressing presspersons here recently, Dheeraj Dikshit, Head-SME (commercial banking), HSBC (The Hongkong and Shanghai Banking Corporation), said his bank was aggressively focussing on this sector especially on the SMEs based in India, China, Indonesia and Malaysia.

HSBC was serving more than 70,000 SME customers and the plan was to add 50 per cent more customers, Mr. Dikshit said.

The initiatives included reaching out to customers in the under-served markets and the introduction of specific products and services.

However, SMEs face certain risks on the export front. These include country-specific risk and foreign currency risk due to fluctuation in value.

These result in a prolonged delay in getting payments for the shipments depriving the exporters to close the sale and claim export benefits in some cases from the Government in time.

In such cases, HSBC would step in to assist exporters and in some cases discount the payments upfront, Mr. Dikshit said.

By understanding the risks involved, HSBC has put in place a number of risk control measures. “Given the capital strength of the bank our ability to take on counterparty risk is more”, Mr. Dikshit said.

On the technology front, the introduction of RTGS (Real Time Gross Settlement) was highly helpful to exporters. However, many exporters were not using this facility and a lot of education was needed, he said.

The country-specific risk was due to the pressure on foreign exchange reserves in that particular country to which exports were made and the country might impose restriction on payment overseas because of depleting forex reserves.

In some cases, HSBC had stepped in to assist exporters, Mr. Dikshit said.

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