India's Axis Bank bets on MSME, shorter-term loans to boost corp credit

By Nupur Anand

MUMBAI (Reuters) - Axis Bank, India's third-largest private lender, will focus on mid-corporate and working capital loans, shifting away from longer tenure lending and chunkier infrastructure-related loans, a top executive said 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."

The MSME segment comprises about 20% of Axis' lending book currently, Anand said.

The bank's corporate loan book rose by 13% in the September-quarter, while its SME book grew by 28% and mid-corporate business by 49%.

The lender is seeing demand for capex growth, apart from working capital, an indicator that investments are picking up.

"The economic environment is very conducive, credit environment is benign and corporate balance sheets are deleveraged, 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 the last few months, lenders, including Axis Bank, had raised the issue of mispricing of corporate loans as a bunch of banks chased a few opportunities to boost credit growth.

But Anand said that issue is easing now as more corporates are looking to borrow from banks.

And while credit growth has picked up, deposit growth remains low. Lenders saw credit growth of around 17%, while deposit growth was at 8.25% as of Nov. 4, latest central bank data showed.

To boost its deposits, Axis Bank has renewed its focus on corporate salary accounts and is pushing to improve the productivity at each branch, said Anand.

CITI DEAL "ON TRACK"

Axis Bank had said in March it would buy Citigroup Inc's domestic consumer banking arm for $1.6 billion to bolster its credit card and retail business.

"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 had suggested that Citi's credit card business had shrunk in the last few months, which could lead to a price cut, but Anand dismissed the suggestions.

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

(Reporting by Nupur Anand; Editing by Savio D'Souza)