
The State Bank of India (SBI) has implemented a digital process for sanctioning loans to small and medium enterprises (SMEs). According to the SBI’s deputy managing director, Surender Rana, the bank has digitally sanctioned 20,000 loans in the range of Rs 10-50 lakh in the last six months. These loans are drawn from various data points and are processed entirely online.
Streamlined Lending Process
To streamline the lending process, the SBI utilizes an ecosystem of APIs (Application Programming Interfaces). These APIs help the bank gather and analyze data from multiple sources, including income tax records, GST returns, and bank statements. The SBI claims to take only up to 45 minutes to sanction digital SME loans, providing a quick and efficient service to borrowers.
Waiver of Financial Statements for Loans up to Rs 50 Lakh
Notably, the SBI has waived the requirement for financial statements for loans up to Rs 50 lakh. Instead, the bank relies on transaction history and GST returns to assess the creditworthiness of borrowers. This approach is aimed at addressing the challenges faced by the MSME (Micro, Small, and Medium Enterprises) segment, which often lacks proper documentation and credit history.
Growth of SBI’s SME Loans
SBI’s SME loans have experienced significant growth, with a year-on-year increase of 21% to reach Rs 4.33 trillion as of March 2024. This growth reflects the importance of providing financing to the MSME segment, which contributes 30% to India’s GDP. However, the report by Deloitte India highlights that only 2.5 crore out of 6.3 crore MSMEs are currently funded through formal channels.
Importance of Data Analytics in Assessing MSME Financing
The rise of data analytics is viewed as critical in assessing the financing needs of the MSME segment. Traditional metrics such as credit history and collateral may not be sufficient for evaluating the under-penetrated MSME sector. Deloitte India’s report emphasizes the significance of leveraging data from various sources to make informed lending decisions.
Challenges and Considerations for Banks
While digital processes have facilitated loan sanctions, banks need to consider the cost implications of adopting new technologies. The Deloitte report suggests that banks should invest in modernizing their tech stack, utilizing modular architecture, and implementing real-time updates instead of legacy batch processing systems. Additionally, talent acquisition, upskilling staff in technology, and ensuring cyber security and data privacy standards pose challenges for banks seeking to enhance their digital capabilities.
SBI Raises $100 Million Through Bond Issue
In other news, the SBI has raised $100 million through a three-year senior unsecured floating bond issue. The bonds will be issued through the London branch on June 20 and have a coupon of 95 bps over the secured overnight financing rate, payable on a quarterly basis. This bond issue allows the SBI to access additional capital for its operations.