Axis Bank Stakes Its Credit Expansion on Working Capital Loans and MSMEs

Axis Bank, India's third-largest private lender, will shift its focus to mid-corporate and working capital loans, away from longer-term lending and larger infrastructure-related loans, according to a top executive on Friday.

"Within the corporate side, we were more infrastructure, longer term-loan focused earlier. We are now moving to be more working capital or shorter term-loan focused to reduce risk," Rajiv Anand, deputy managing director of Axis Bank, said in an interview.

"I do believe that MSME (medium and small and medium enterprises) lending will be, over the next decade, what retail was in the previous decade."

According to Anand, the MSME segment currently accounts for about 20% of Axis' lending book.
In the September quarter, the bank's corporate loan book increased by 13%, while its SME book increased by 28% and its mid-corporate business increased by 49%.

Apart from working capital, the lender is seeing increased demand for capex growth, indicating that investment is picking up.

"The economic environment is very conducive, credit environment is benign and corporate balance sheets are deleverage, so we don't see much of a challenge in the short-term," Anand said.
"We are quite positive on the segments we are focused on."

In recent months, lenders, including Axis Bank, have raised the issue of corporate loan mispricing as a group of banks chased a few opportunities to boost credit growth.

However, Anand claims that the situation is improving as more corporations seek to borrow from banks.
And, while credit growth has increased, deposit growth has slowed. Credit growth was around 17% for lenders, while deposit growth was 8.25% as of Nov. 4, according to the most recent central bank data.
To increase deposits, Axis Bank has refocused on corporate salary accounts and is working to improve productivity at each branch, according to Anand.

CITI DEAL "ON TRACK"

Axis Bank announced in March that it would purchase Citigroup Inc S domestic consumer banking arm for $1.6 billion in order to strengthen its credit card and retail businesses.

"The guidance has been that we are aiming to close in the first quarter of next calendar year. We are well on track to meet those timelines," said Anand.

Some analysts speculated that Citi's credit card business had shrunk in recent months, which could lead to a price cut, but Anand dismissed the speculation.

"The numbers are broadly in line with expectations. So, this narrative that numbers are dropping is not true."

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