State Bank of India (SBI) has initiated “Cash Budget Based Assessment (CBBA)” of Fund Based Working Capital (FBWC) limits for units and intends to focus on refinancing better rated corporates in a bid to achieve minimum 11.50 per cent year-on-year growth in whole bank advances in FY2021.
Further, the country’s largest lender will seek more business from personal segment products, home loans and risk-mitigated products in the new financial year beginning April 1, 2020.
The whole bank advances of India’s largest bank grew by 6.79 per cent year-on-year (yoy) to ₹23.01-lakh crore as of December-end 2019 against ₹21.55-lakh crore as of December-end 2018.
So far, SBI has been following the “Projected Balance Sheet (PBS)” method for assessment of the working capital requirement for large advances. However, due to increase in the number and complexity of the digital transactions, the monitoring of transactions/assets of the borrowers has become a major challenge for the operating units.
Accordingly, the CBBA of limits has been initiated for assessment of the FBWC limits for units with total FBWC exposure of more than ₹50 crore from the banking system. “This is expected to lead to better assessment of the borrower’s cash requirements and enforce financial discipline,” SBI Chairman Rajnish Kumar said in a communication to employees.
SBI has started Risk Intel, an email service, advising the business units of rating actions in respect of units it has funded. To address delays in manual updation, the bank is also exploring the option of direct upload of external credit ratings in the Core Banking System.
More and more credit proposals are now being routed through credit review department and the risk is now being captured in a more meaningful way before sanction of credit, the communication said.
“In view of the above, while we expect to grow under corporate segment in line with the market trends, we need to pay special attention on growth of retail and MSME (micro, small and medium enterprise) financing,” the SBI chief observed.
Betting on personal finance
The lender plans to focus on refinancing “AAA/AA” rated corporates, where cash flows are on expected lines, for funding their completed projects to boost quality credit. Also on its radar are high yielding personal segment products.
“We should continue with our focus on home loans (including top-up loans) and continue to expand the retail loan book. Focus more and more on risk mitigated products such as asset backed loans, gold loans, channel financing, mortgage loans, loan against pension, etc with thrust on high return on assets,” said Kumar.
The bank also intends to step up focus on popular risk mitigated loan products in the agriculture sector such as multi-purpose gold loan, asset backed agriculture loan (ABAL), big-ticket loans to dairy, poultry, horticulture, rural infrastructure, etc to attain growth in the agriculture segment.