We have completely redefined our business process: SBI MD Sriram

With not much demand for big ticket loans from India Inc, State Bank of India, the country’s largest bank, has focused its efforts on growing retail loans, stepping up recoveries, and tweaking the way loans are given and monitored. In an interview to Business Line , B Sriram, Managing Director and Group Executive (National Banking), SBI, said it is important for lenders to get a feel of the borrowers’ cash-flows so that money is not diverted. Edited excerpts:

Given that the economic climate was not conducive for business, how did SBI face the challenge in FY15?

A lot of things are happening, the results of which will be seen in the days to come. We are in the midst of, first, consolidation and then looking ahead for the next two three years.

One is, of course, consolidating in terms of what we have on our books. Now, this is a period where, maybe, the credit growth is slightly less. So, this was an ideal time for us to consolidate in certain areas that have led us to falter. And the three big areas from where non-performing assets (NPAs) arose are mid-sized corporates, small and medium enterprises (SMEs) and agriculture. In two of these segments that I oversee — SME and agriculture, you will find the NPAs are around 8-10 per cent.

How did you achieve the progress made on the recovery front?

 NPA management is both proactive and reactive. We have a well-established stressed assets management committee headed by a Deputy Managing Director, who reports to the Chairman. We have various stressed-asset branches. Loans above ₹25 lakh that are stressed are migrated (to theses branches) and there is sharper focus on those accounts. These accounts can either be restructured or the recovery process starts. A good thing is that there is no delay (in pursuing cases) now.

The second advantage is the focus on procedure of courts and Debt Recovery Tribunals (DRTs) and the liaison on what is to be done or who looks at it is very clear.

During the third quarter (Q3), we achieved recoveries of ₹602 crore, against ₹360 crore in the same quarter last year. This goes to the bottomline directly. So, it is a big step forward.

The soft recoveries have also improved as we have put in place mechanisms such as call centres and SMSes sent out a week prior to the (loan) due date. We charge for the delinquency, even if it is for a day or week after the due date. This helps people pay on time. 

How has your approach to lending changed?

 We have completely redefined the process by which we do business — right from lead generation down to finally monitoring the account and seeing that it doesn’t default.

We have taken the help of a consultant to develop a computerised way of monitoring business from generating leads onwards. We have tweaked a couple of things.  We already have relationship managers for medium enterprises and small enterprises. We have provided them with sufficient leads to go and get the business. Tracking happens online. And what output they give on a daily basis is measured by us.

Once a loan proposal is approved/ sanctioned, within 48 hours it is sent online to an offsite review mechanism, where we have people with a credit background offer an independent view of that sanction and give us feedback. This not only improves the sanctioning process but also improves people’s skill levels.

The second thing we have started is to try and look at risk mitigated products in a more significant way.

Earlier, it was largely balance-sheet financing – an entrepreneur gives you a balance sheet, you analyse it, you assess the working capital requirement, and try and fix the credit limit and then use the stock statements to keep funding it... What we have done is tried to push our people towards risk mitigated products, starting from asset backed lending to electronic dealer finance, electronic vendor finance, 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.

Going forward, these risk mitigated products will help us bring down the pricing (for the customer) because the risk is less, NPAs are less, then the cost to the bank is actually less. It becomes attractive to the customer. It becomes attractive to the bank because we don’t have too much follow-up to do and technology takes care of the rest.

How has the retail loan growth been?

Two of the (housing) markets — Pune and Bengaluru — are doing pretty well. Some of the markets — Mumbai, Delhi NCR, and Chennai — are showing signs of some slowdown.

But we are expecting to close with 14-15 per cent growth. This is more or less the industry average. But with our home loan portfolio size of ₹1,53,000 crore, we hope that 14-15 per cent is a good growth rate currently. The home loan sanctions are at an average of ₹180 crore a day. The takeover of home loans has improved. We now have a home equity product. This is a top-up loan for home loan borrowers. This is for people who would like to renovate, put in some more furnishings, so on and so forth.

In the car loans segment, in the first six months, actually we grew very slowly because there were certain policy decisions taken in the previous year in terms of making eligibility more stringent and we were also re-tweaking our system of appraisal. So, now we have mapped mostly all branches.

Having done that, and strengthened the loan sanctioning process, we thought that towards the second half of the year we would go ahead and initiate a much more aggressive campaign. Actually, we used to sanction 300-400 car loan proposals daily. Now we are doing 1,300-1,400 a day.

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