‘SMEs are silent drivers of economy’
Sanjeev Mantri, Joint General Manager and Head-Cluster Banking Group of ICICI Bank talks to Katya Naidu on the bank’s plans for the pharma sector.
What is your view on the growth prospects of the pharma industry?
The Indian pharmaceutical industry continues to show satisfactory growth in terms of infrastructure development base and product use. As the world’s leading players look for reductions in cost for new drug discovery and manufacturing, India with its advantage of high scientific skills and lower operating cost is likely to emerge as a partner in R&D and manufacturing for international players. These will provide Indian pharma industry a growth opportunity in the global markets. The Indian domestic pharma market also affords a vast potential due to increased focus on lifestyle diseases.
Does ICICI Bank view pharma as an important segment of the industry?
Pharma industry is in one of the ten identified growth industries within the SME space. Under our cluster banking approach, we have a dedicated team to service the
ICICI Bank is funding projects in pharma industry. Pharmaceuticals industry is one of the fastest growing industries in India and we would like to be associated with this industry. ICICI Bank wants to be a partner in the growth of the industry not only by meeting its financial requirements but also by providing consultancy services to enable pharmaceuticals companies meets their goals.
Pharma industry is in one of the ten identified growth industries within the SME space. Under our cluster banking approach, we have a dedicated team to service the requirements of the industry. This team has members from the pharma industry who help appreciate the requirements of our customers better so that we can provide customised and effective financial solutions peculiar to the industry.
Why are you focusing on small and medium enterprises?
Pharma industry is in one of the ten identified growth industries within the SME space. Under our cluster banking approach, we have a dedicated team to service the requirements of the industry
Small and medium enterprises (SMEs) all over the world have been recognised as the silent drivers of a nation’s economy. Their enterprise is laudable and their ability to generate pools of growth and employment, invaluable. This is true for most developed, as well as developing economies. The SME story in India is no different. With over 40 percent of industrial output through 95 percent industrial units, SMEs form the backbone of the Indian economy. In the emerging economic order, SMEs would be at the leading edge when it comes to innovation and entering new global markets. SMEs in the auto ancillary sector, garment exports or pharma sector are already making their presence felt in the international vendor markets.
What is the unique nature of cluster based approach to SME banking?
Banks have traditionally lent against the security of fixed assets. This has resulted in the SMEs being under-financed or inadequately financed. Lending to SMEs requires a slightly different approach vis-a-vis the corporate sector. It is only recently that some private sector banks like ICICI Bank, have come up with alternate methodologies to finance SMEs. We have taken a slightly different approach to meet financial requirements of this sector through innovative products and services like receivable financing, factoring, cash flow based lending and collateralised lending. Using a sector specific approach (cluster approach) would help us to get a better understanding of the sector and develop credit proxies to evaluate their business. Unlike the conventional financials based lending model, the cluster approach captures a 360 degree view of the SME bringing out the strengths in terms of its manufacturing capabilities, marketing strengths, position vis-a-vis competitors and other strengths. This gives a true understanding of the SME’s potential and therefore put the bank in a better position to take credit calls, much beyond the usual financial parameters.