State Bank of India (SBI) has digitally sanctioned 20,000 loans of the ticket size of Rs 10-50 lakh to small and medium enterprises (SMEs) in the last six months, deputy managing director Surender Rana said at the annual IMC Banking Conference on Friday.
“These loans are all digital and drawn from various data points. We rolled out Rs 10 lakh to Rs 50 lakh (digital SME loans) in December and already sanctioned 20,000 loans through this process. We have now also started Rs 5-crore loans (under the facility).”
Earlier this week, SBI said in a release that the bank takes only up to 45 minutes to sanction digital SME loans. The bank uses an ecosystem of APIs to streamline the entire lending process. It uses data from income tax records, GST returns and bank statements to sanction these loans.
“Notably, for loans of up to Rs 50 lakh, SBI has waived the requirement for financial statements, relying instead on transaction history and GST returns for appraisal,” the release said. SBI’s SME loans grew 21% year-on-year to Rs 4.33 trillion as on March 2024.
According to a report by Deloitte India, the rise of data analytics – other than the traditional metrics of credit history and collateral ― is critical in assessing the financing of the large, under-penetrated MSME segment that typically lacks documentation and credit history. MSMEs contribute 30% to India’s GDP, and currently, only 2.5 crore of 6.3 crore MSMEs are funded through formal channels, it said.
While lenders are using digital processes to sanction loans, they will have to consider the cost implications of adopting newer technologies. Cost needs to be measured to enable API integration with new-age fintech firms and third parties and introduce newer products and custom experiences. To enable business as a service, for instance, banks will need to modernise their core systems.
“Banks would also have to invest in modernising the tech stack and using modular architecture, such as microservices. In addition, real-time updates (as opposed to the legacy batch processing systems) would be required,” the Deloitte report said, adding that talent acquisition, upskilling staff in technology, ensuring adequate cyber security and data privacy standards remain key challenges for banks to increase their digital prowess.
Lender raises $100 million via bonds
SBI on Friday informed the exchanges that it has raised $100 million via three-year senior unsecured floating bonds. The notes will be issued through the London branch on June 20. Bonds have a coupon of 95 bps over the secured overnight financing rate, payable on a quarterly basis.