State Bank of India’s (SBI) YONO mobile application has generated loans worth Rs 1 trillion, SBI chairman Dinesh Kumar Khara said in an interaction with Motilal Oswal Financial Services. Digital loans disbursed on the SBI YONO stood at Rs 71,000 crore as on December 31, 2022.
The digital banking application is now opening more than 30,000 savings accounts on a daily basis, while in-principle approval for gold loans stands high at 52-53%.
SBI YONO allows users access to a variety of financial and other services such as flight, train, bus and taxi bookings, online shopping, or medical bill payments.
“The cost of acquisition (for customers) is lower for YONO, which is likely to result in operating efficiency and moderation in cost ratios. While the cost-to-assets ratio remains among the lowest, the bank believes that it can further improve the ratio by a few basis points,” analysts at Motilal Oswal noted.
Akin to SBI YONO application, Kotak Mahindra Bank’s Kotak 811 and ICICI Bank’s iMobile Pay application have witnessed strong traction.
Similarly, value of transactions on ICICI Bank’s iMobile Pay application has risen 29.2% year-on-year as on December 31.
While Kotak Mahindra Bank has not disclosed the latest data on its Kotak811 application, overall throughput rose 104% year-on-year in 2021-22 (April-March).
This pick up in digital transactions is the result of banks focussing on their digital banking platforms in order to cut down operating costs. This is expected to continue going ahead, say bankers.
“In the next one year, you will see banks trying to cut corners in terms of operating costs. There is a limit to which, you can take interest rate up on assets and there is a limit to which, you can hike the interest rate on deposits,” Rajan Pental, executive director, YES Bank said.
The push for digital banking has coincided with the growth in the digital loans. Digital loan values have grown sharply in recent times even as Reserve Bank of India (RBI) has tightened norms for digital lenders in recent times.
Digital loan volumes grew 147% year-on-year and digital loan value rose 118% year-on-year in the December quarter, a recent report by the Fintech Association for Consumer Empowerment showed.
With the growth of the Unified Payments interface (UPI), borrowers have been inclined to avail loans through the digital loans as the disbursements occurs at a faster pace.
In line with RBI’s digital lending norms, various banks have been keen to partner with financial technology companies to cater to a wider customer base without having to expand its branches.
“Partnerships have always been an important part of our strategy. We are working with a number of partners. In the next quarter or so, we will go live with at least two large partners and in the next few months, many large partners in digital lending where the partner will play the LSP (Lending Service Provider Role) and we will play the lender role,” said Sameer Shetty, president and head of digital business and transformation, Axis Bank.
In a partnership between a bank and a financial technology company, the credit risk and underwriting process is typically done by the bank and the financial technology company disburses the loans.
“The larger banks like SBI, Kotak Mahindra Bank have a very strong customer base. They have created their own products which acts like fintech products.
“At the same time, a lot of the mid-sized and smaller banks partner with fintechs and utilise them for distribution. One is the organic way of acquiring a customer and distributing them through your own channel. Second is the inorganic method where you do it through a fintech. Both are active,” said Vaibhav Joshi, co-founder and chief executive officer, Easy Pay.