SBI looking to push up lending to small businesses

To grow its small and medium enterprises (SME) loan portfolio, State Bank of India is setting great store by the opportunity to lend to the e-commerce ecosystem, taxi aggregators, franchisees in the health, beauty and food segments.

This comes in the backdrop of India’s largest bank streamlining its systems and procedures in the last financial year to undertake risk-mitigated lending in the SME segment. Risk-mitigated lending includes asset-backed lending, loans with credit guarantee fund trust cover, electronic dealer finance scheme, and bill discounting against letters of credit.

The bank plans to step up the share of risk-mitigated lending within the SME portfolio to 40 per cent by March-end 2016 from 28.51 per cent as at March-end 2015.

In the face of rising bad loans, SBI had de-grown its SME portfolio in financial year 2013-14 to contain rising stress.

The SME portfolio had declined to ₹1,79,773 crore as at March-end 2014 from ₹1,84,128 crore as at March-end 2013. In financial year 2014-15, this portfolio saw a marginal increase of ₹1,700 crore.

In an interview to Business Line in February, B Sriram, Managing Director, said that SBI has completely redefined the process by which it does business — right from lead generation down to finally monitoring the account and seeing that it doesn’t default.

“So, what we have done is we have tried to push our people towards risk-mitigated products, starting from asset-backed lending to electronic dealer and vendor financing schemes, bills finance, and SME finance with cash flows being captured by the system.

“Once we know that the collection is not hitting us, it serves as an early-warning signal that we need to do something quickly and try and resolve it,” explained Sriram.

Within the e-commerce space, SBI has identified seller financing, and providing loans to e-retailers’ partners (logistics providers, suppliers, and processors) as opportunities for lending.

With large number of global and domestic franchisors operating in the country through franchisees in the food and beverage, healthcare, education, retail, beauty, apparel, and gymnasium segments, the bank expects to turn them into customers.

Taxi aggregators, such as Ola and Uber, too, present a fast-growing opportunity to finance vehicles for drivers. The bank also sees scope for value-chain financing (production and procurement, storage, processing, transportation, and marketing) in the agriculture and non-agriculture segments.

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