State Bank of India (SBI) might reach its goal of a Rs 4-trillion loan book for the SME segment by March 2023, instead of the earlier timeline of March 2024 set by the bank, chairman Dinesh Khara said in an analyst call. Several initiatives over the past year have aided in an accelerated growth in the segment, he said.
“We have set a target of reaching Rs 4 trillion by March 2024, but the way things are we should be very near to that by March 2023,” Khara said.
The SME book of the bank grew 14.2% Y-o-Y to Rs 3.51 trillion as of December 31, consisting of 11% of the total loan book.
The bank has invested in terms of structures and capacity building with a focus on distribution finance and vendor finance balance sheet-based lending. SBI has also rolled out pre-approved business loans through Yono which are issued by analysing the transactions in current account of the borrower. This product is becoming very popular, Khara said.
“SME lending has become a continuous focus area and we are mindful of our quality of lending. The bank has created a loan management system where we have visibility in terms of unstructured information through GST, etc,” he said.
The bank has strengthened its underwriting practices in the SME segment and has invested in terms of manpower and product, due to which the growth in the SME book is likely to be sustainable, Khara said.
On the corporate side, the bank has got a loan pipeline of Rs 3 trillion, which includes Rs 1.1 trillion where availment is yet to be taken in term loans and working capital utlisation. The bank’s corporate portfolio improved by 18% Y-o-Y in Q3FY23 to Rs 9.3 trillion, with a majority share of loans being issued to infrastructure and services sectors. The infrastructure loan book grew by 5.6%, led by power, roads and ports segments, while loans to the telecom sector fell 17%.
“One positive trend is non-availment of term loans has come down quite a lot, and that normally augurs well as working capital improves after that. Although working capital utilisation availment has declined, we have seen an increase of 24% in sanctioning in the large coproate segment,” Khara said.
The bank is looking to improve the net interest margin (NIM) of its international loan book, which stood at 1.26% as of December 31. The bank’s foreign portfolio grew 9.15% in Q3FY23 in dollar terms, and its profile of borrowers includes local corporate along with Indian companies. Loans to local companies are done via the syndicate mode while those to foreign arms of Indian companies are through external commercial borrowings.
Other than raising deposits, the bank might look at raising funds through market instruments such as infrastructure bonds owing to lower cost. The bank has already raised funds through infra bonds. By Q4FY23-end, the bank’s capital adequacy ratio will be at 14.5%, and at that level, the bank can support the credit growth of at least Rs 7 trillion, Khara said.