The small- and medium-size enterprise (SME) sector has been regarded as typically `high risk and high delinquency' in banking circles. Public sector banks that have been involved for a long time in funding this sector have a quagmire of bad loans in their books.
Private sector banks hope to learn from past bad experiences and are betting on superior credit screens, strict adherence to stronger systems and processes, picking customers carefully, and stringent monitoring of accounts to save themselves from the inherent perils of this market.
Banking analysts are of the view that the new entrants will not lend recklessly and have good credit evaluation skills. Despite the lack of published or reliable information available on the SME sector and clients often having incomplete balance sheets, new age banks, such as HDFC Bank, ICICI Bank and UTI Bank, appear optimistic about the sector.
