HDFC Bank, India’s largest private lender, will lead a more focused approach to expand its small and medium enterprise (SME) banking platform.

Expecting SME loans to be the fastest-growing segment over the next three-five years, the bank has made recent changes in its management structure in this vertical to drive growth in the business.

HDFC Bank plans to leverage its distribution in non-urban markets and digital strengths to expand the SME loan business under Rahul Shukla.

Already among the top bankers in the SME loan business, HDFC Bank is aware of the asset quality risk in this segment and will continue to adopt a tighter approach.

“The bank is cognisant of the asset quality risks associated with this segment and hence will keep underwriting and collection teams tighter," HDFC Bank’s top management told analysts.

Brokerage firm Jefferies hosted HDFC Bank chief executive Sashidhar Jagdishan and chief financial officer Srinivasan Vaidyanathan at its recent India Financial Summit.

HDFC Bank recently reorganised into three distinct focus areas – business verticals, delivery channels, and technology & digital. Naming it Project Future-Ready, the bank made a slew of changes in the senior leadership roles. Shukla was entrusted with the commercial banking (MSME) and rural vertical.

Jagdishan told analysts that while the bank had taken a cautious view over the past one to one-and-a-half months in the light of Covid-19 and its impact on staff and clients, the falling infection rates and vaccination are supporting the opening-up of the bank. The field staff, including sales and collections, are more comfortable taking outbound responsibilities.

“On the client side, the bank is largely comfortable as 85% of retail clients work with corporates rated AA and above, where job losses have been low, SMEs were better prepared than in the past, and larger corporates have better liquidity in their balance sheet," Jagdishan said.

HDFC Bank said it continues to work with the Reserve Bank of India (RBI) to resolve the digital banking issue and at the same time build more robust platforms.

“While tech outages are a normal business risk for any bank or financial company, the bank could have built a system to ensure faster recovery here," Jefferies said in its report.

On the fintech side, the bank plans to build partnerships with platforms that can help to bring together scale and seamless experience.

On 2 December, the RBI directed HDFC Bank to halt all launches of its digital business generating activities under 'Digital 2.0', along with sourcing new credit card customers, until the lender addresses the lapses that led to a series of glitches.