Tag: SME

How SBI is readying a big SME lending push, grow loan book to Rs 4 lakh crore, BFSI News, ET BFSI

Banking & Finance

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After crossing Rs 5 lakh crore in home loans, State Bank of India has set a similar target for the small and medium enterprises (SME) segment.

The bank plans to increase its SME market share to t 20% from 15% at present and grow its loan book to Rs 4 lakh crore in three years, according to a report.

How the bank plans to do it

State Bank of India plans to revamp its entire operational setup for lending to micro, small and medium enterprises to improve turnaround time and customer experience while keeping bad loans under a lid. It is seeking bids from consultants for the process.

In the request-for-proposal (RFP) dated March 26, the bank said “With the objective of becoming banker of choice for MSMEs, SBI intends to improve existing processes and structure in the SME space for achieving improvement in market share/enhance the portfolio while ensuring the asset quality,” SBI said.

The document said that the bank is looking to increase its market share in this category from 15%.

The bank wants to increase onboarding in its Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which is seeing poor offtake and high non-performing assets. It is looking to develop analytics tools to generate supply chain financing business from its existing current account (CA) base.

The segments

The bank lends to MSMEs under four verticals — SME Centre and relationship managers, supply chain finance, CGTMSE and cluster financing.

According to the RFQ, for the supply chain finance (SCF) vertical, SBI is looking to benchmark current dealer/vendor financing SCF journeys with global players and identify gaps. It wants to develop value chain analytics capabilities, including an analytics framework on the lack of transaction flows of the existing current account base to generate leads for vendor and dealer onboarding.

For the CGTMSE segment, the bank wants to under the reasons for the poor offtake of schemes and is seeking remedial measures. It wants to identify deficiencies while onboarding that could hurt asset quality.

At the SME centre, the bank is looking to identify gaps in the end-to-end process of loan origination, sanction and monitoring and propose changes in process flow and end-to-end digitisation specific to loans up to Rs 1 crore. It wants to reduce the turnaround time and improve on-boarding. To enable the relationship manager (RM), the bank wants to benchmark the digital offerings of RMs of peers and identify areas of data obtention that can be digitised and centralised.

In cluster financing, the bank wants to build a coordination mechanism with various government agencies for increased thrust in the cluster portfolio. The bank is also looking at tie-up with new fintech firms.

SBI has 1,770 relationship managers to cater to the MSME segment. It has more than 1,100 specialised SME intensive and MSME branches.

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RBL Bank and Tide, collaborate to serve Indian SMEs, BFSI News, ET BFSI

Banking & Finance

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Private lender, RBL Bank has tied-up with Tide India, a UK-based banking fintech, to provide banking infrastructure for Tide’s India platform focused on the SME segment.

This collaboration will enable Tide to bring its platform to the Indian markets with a full-fledged launch. Under the tie-up, businesses, especially small and medium-sized enterprises have an option to open current and savings accounts at RBL Bank through Tide’s business platform.

Depending on customer requirements, the Bank can also integrate its payment APIs. Tide plans to acquire 25,000 customers in the next financial year and scale up to two million customers in the next five years.

Apart from supporting the organised SME sector, Tide will also focus on serving the unregistered and unorganised sector, helping bring these SMEs into the mainstream by providing them access to RBL Bank’s plethora of business banking products and services.

Surinder Chawla, Head Branch Banking, RBL Bank said, “RBL Bank has agile technological capabilities and compelling customer offerings to help Tide build a strong foundation in the country and scale up its business. Together, we are passionate about delivering innovative and integrated services that will improve the overall banking experience for the SME segment.”

Oliver Prill, Tide CEO said, “RBL Bank offers industry leading banking, payments and security technology, giving Tide the foundations that will enable us to build the best possible service to help SME owners save time and money through its digital banking capabilities.

Prill added, “With this partnership, we are ready to begin initial testing of Tide India, before entering into similar partnerships with other leading fintech providers to build our platform during the course of 2021”



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Mudra loans tide over Covid-19 blues

Banking & Finance

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The disbursal of small business loans under Pradhan Mantri Mudra Yojana (PMMY) has almost come out of Covid bluesand may match last fiscal’s figure, going by the current trend.

With one month left for the closure of the current financial year, loans worth ₹2,32,594 crore have been sanctioned as on February 19, 2021, of which, ₹2,19,107 crore has already been disbursed.

In the previous fiscal, total sanctioned loans under Mudra, as on February 20, 2020, stood at ₹2.77-lakh crore.

PMMY is a scheme of the Centre to provide loans of up to ₹10 lakh to non-corporate, non-farm small/micro enterprises. These loans are classified as Mudra loans under PMMY.

These collateral-free loans come in three categories – Shishu (up to ₹50,000), Kishore (between ₹50,000 and ₹5 lakh) and Tarun (₹10 lakh).

Small business loans sanctioned under the PMMY have exceeded the target set for the financial year ended March 31, 2020, at ₹3,37,495 crore.

“Given the fact that banking operations and business were impacted for a significant period of almost two quarters, the present performance of Mudra loans is certainly beyond initial expectations,” a senior official with Union Bank of India, told Business Line.

Reverse migration

The reasons for the steady demand of Mudra loans are varied. According to a senior SBI official, loss of jobs in urban areas due to pandemic-induced circumstances has resulted in reverse migration to rural- and semi-urban areas. “Some of the people are now setting up small business to make a living and PMJY is facilitating this,” he said.

As part of the economic stimulus package, Atmanirbhar Bharat Abhiyaan, the government had also announced interest subvention scheme for Shishu loans.

Under this scheme, loans are given interest subvention of 2 per cent for 12 months from May 2020, which has made these advances more affordable for petty entrepreneurs, say bankers.

Bankers, however, are tight-lipped over the quantum of Non-Performing Assets (NPAs) under Mudra loans in the current financial year. The clear picture on bad loanswill only emerge only after the closure of the current financial year, they say.

As per government data, NPAs in 2019-20 were at 4.80 per cent of the total loans disbursed.

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NPAs to be nebulous owing forbearance dispensations, restructuring schemes: CARE

Banking & Finance

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Non-performing assets (NPAs) of Banks this year would tend to be a bit nebulous due to the various forbearance dispensations that have been given besides the restructuring schemes that have been introduced, according to CARE Ratings.

Banks, however, have been more proactive in terms of being cognizant of the regulatory environment and the fact that there could be an increase in quantum of NPAs once normalcy returns.

“This would affect not just corporate loans but also those pertaining to the SME (small and medium enterprise) segment and retail borrowers,” the credit rating agency said in a note.

Referring to the Reserve Bank of India’s (RBI) Gross NPA projection in its latest Financial Stability Report, CARE said even the baseline scenario, which also considers the withdrawal of the regulatory dispensation, is quite high. These stress scenarios will get reflected in a sharp increase in the slippage ratio, it added.

As per the latest (January 2021) FSR, GNPA ratio of scheduled commercial banks (SCBs) could rise to 13.5 per cent by September 2021 from 7.5 per cent in September 2020 under the baseline scenario.

Cumulative provisions

Cumulative provisions made by Banks for the year (which includes for NPAs among others) was around Rs 1.78 lakh crore in these three quarters.

Per CARE’s assessment, the picture so far this year has been positive with a tendency for gross NPAs to move down both in terms of amount as well as ratio of outstanding credit.

“There was a contrarian movement in June after which there has been a decline. The decline in NPAs indicates negative slippage ratio — incremental NPAs to outstanding credit at the start of quarter,” the agency said.

GNPAs of 30 Banks rose from 7.94 per cent of gross advances as at March-end 2020 to 8.20 per cent as at June-end 2020. However, GNPAs declined to 7.72 per cent as at September-end 2020 and 7.01 per cent as at December-end 2020.

Referring to RBI’s Report, the agency said it had indicated that as of September 2020, the gross NPA ratio was above 20 per cent for gems and jewellery and construction sectors and above 15 per cent for mining and engineering. For industry it was 12.4 per cent.

“Retail had a ratio of 1.7 per cent which can be an area of concern going ahead. Further, large borrowers had a gross NPA ratio of 11.3 per cent,” it added.

Distribution of GNPAs

As per CARE’s analysis of the third quarter results of 30 Banks, only HDFC Bank had GNPA of less than 1 per cent. Eleven Banks had GNPA in the 1-4 per cent range and 7 banks had GNPAs in the 5-10 per cent range.

Five Banks had GNPAs in the 10-15 per cent range and 2 Banks had GNPAs in the 15-20 per cent range. Only one Bank had GNPA above 20 per cent.

The positive development is that all of them witnessed a decline in the gross NPA ratio during this period, the agency said.

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This is how Federal Bank is empowering its first neo retail, SME & merchant platforms, BFSI News, ET BFSI

Banking & Finance

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Jithesh PV, Digital Head, Federal Bank

Private lender Federal Bank, headquartered in Kochi, is spearheading digital initiatives across the bank. The idea with digital strategy is to lower the cost and enhance revenues. The bank expects that in the next three years the digital channels will take care of around more than 50% of investments.

Jithesh PV, Head – Digital Banking at Federal Bank in an interaction with ETBFSI, shares his thoughts on the bank’s digital strategy, collaboration with FinTechs, their approach to open banking & how the digital initiatives are supported by a robust backend. Edited Excerpts:

1. What’s the digital banking strategy at Federal Bank? A P&L thought process behind it?
We have a multi-pronged strategy for digital in Federal Bank, aligned with the business mantra, Branch Light Distribution Heavy. We have built the best in class digital platforms for our customers and migrating these customers to digital platforms to enable our branches to focus more on customer acquisition and income generation by cross-selling and upsell. We have rebuilt our Mobile Banking into an all in one app with payments, UPI, Investments, Loans, lifestyle, and many other services that allow even non-customers to download and use the app. We have also created an omnichannel platform for Corporate clients, with full-fledged features like Account Services, Supply Chain Finance, Cash Management Services, Payable Management, Receivable Management, Trade Finance, etc.

We have enabled an end to end Open Banking platform that helps the bank to grow inorganically with the help of partnerships. We are now empowering the first neo retail platform, first neo-SME platform, first neo-merchant platform and we are also building our neo-education platform.

All the initiatives are expected to bring revenue to the bank. Today around 86% of our transactions are happening through digital channels and this has helped the bank to focus more on customer acquisition and cross-sell through brick and mortar channels.

We hope that in the next three years, digital channels will take care of around more than 50% of investments, especially MF and also insurance sales. The partnerships will help the bank to garner more low-cost funds. Partnerships are also helping us to manage more sales of PL and Debit Card EMI. The whole digital strategy is focused on reducing costs and enhancing revenue.

2. What goes at the backend in creating a robust digital banking set-up?
This is a continuous journey, and how best one can re-align the business and digital strategy in a fast-paced environment, holds the key.

In Financial services, there are multiple lines of businesses and P&L units. Today, Digital is the core of all of this, which cuts across multiple business lines and products.

We have created a separate centre of excellence for Digital to focus on innovation, R & D, enhancing the customer experience, etc while a 300 member IT team is supporting the entire technology platform and infrastructure. Dedicated teams for all critical services are available as a part of the IT infrastructure.

Support systems are also critical in this digital journey and we have a dedicated vertical for customer service-related aspects, a dedicated contact centre, and a back end operations team that manages all reconciliation and settlements. We have our own sophisticated contact centre and active Disaster Recovery sites in different geographical locations.

3. How’s the API Banking/Open Banking set-up evolving at Federal Bank?
Banking is getting invisible and embedded in the lifestyle journeys of the customer. A robust API Banking platform provides us the required flexibility in being able to reach new customers and extend our products into various interfaces in a Digital-First world.

At a strategic level, it presents a potent and low-cost distribution channel, whose scale and dynamics can be efficiently managed. The suite of use cases and partnerships supported by API Banking is altering fundamental notions associated with traditional Banking and Federal Bank is leading the pack in this game.

4. How’s the Federal Bank collaborating with FinTechs?
While we augment internal capabilities, we are also working very closely with the Fintech community in finding synergies that align with our business goals.

Technologically we have built a very flexible Open Banking Framework and processes that get continually fine-tuned.

This gives us the required agility to interface with partners, based on use-cases that are a strategic fit for us.

We are the preferred partner for Fintechs, which underlines our commitment to co-create and yet provide superior-tech capabilities and process abilities. We have co-created and scaled the largest Gold loan fintech in the country. We clock million+ daily merchant transactions via key partners that serve that segment. We are also working on some interesting NeoBank models, which are expected to take the market by storm.



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Study, BFSI News, ET BFSI

Personal Finance

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by Syed Fasiuddin

Microfinance disbursements in the second quarter of the financial year spiked by 380% over the previous year, as normalcy crept in day-to-day life in urban & rural centres of the country following stringent lockdowns, revealed a report by CRIF.

Disbursements in rural centres increased from Rs 3,634 crore to Rs 17,407 crore between the two quarters, whilst urban centres disbursements stood at Rs 12,311 crore, from Rs 2,539 crore earlier. The figures however stood at a stark decline from the same period a year earlier, where disbursements stood at Rs 32,903 crore in rural parts and Rs 25,796 crore in urban parts, respectively.


The share of banks in disbursals between the first and second quarter of FY21 in disbursals decreased from 67.81% to 50.58%; whilst NBFC’s roared with their share increasing from 8.07% to 29.07%. Small Finance Banks (SFBs) also posted a lower share in disbursals from 20.08% to 12.84% between the first and second quarter of FY21.


The average ticket size in micro loans also grew quarterly by 1.4% to Rs 34700, whilst also posting a yearly growth of 6.7%. Movement was also noted in the ticket size, which in the first quarter of FY21 were focussed mainly on loan sizes of lower than Rs 20,000, occupying 60% of share, whilst in the second quarter was dominated by loans of more than Rs 40,000.

Geographically, the eastern region dominated the microfinance segment with a share of 34.7%, whilst southern and western parts held a share of 26.3% and 14.6%. The northern, central and north-eastern parts recorded a market share of 10.5%, 7.7% and 6.9%, respectively.

The average exposure per borrower increased by approximately 20% and 14% in West Bengal and Tamil Nadu, whilst also recording an increase of 12% in Karnataka. Separately, Tamil Nadu also had the highest share of borrowers, standing at 8.9%, of individuals who had loans with four or more lenders. Karnataka and Bihar retained second and third spots in individuals with four or more loans.



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