State Bank of India (SBI) is looking at providing digital delivery of all retail loans by June 2021, scaling it up from the current level of 60%, said CS Setty, managing director – retail and digital banking, on Thursday. He exhorted non-banking finance companies (NBFCs) to look beyond lending to industry and commercial real estate and to bring down their collection costs for pooled loans.
SBI has 50 professionals in its data sciences department and it plans to expand its strength to 110. This department, which works on the bank’s artificial intelligence/machine learning (AI/ML) capabilities, has helped it identify a majority of its leads in the retail lending segment, Setty said at an NBFC seminar, organised by the Ficci.
“In the pandemic period itself, from April to June which was the lockdown period, we had the largest pre-approved personal loans where the leads have been generated purely on the AI/ML platform,” he said, adding that in the 12-month trail period up to June, SBI had given 1.7 million pre-approved loans.
SBI has also reoriented its approach to microfinance and financial inclusion and now sees it as a full-fledged line of business, rather than as a means to meet regulatory requirements, Setty said. “We have started our own business vertical called financial inclusion. We have designated 8,000 of our rural and semi-urban branches and they are going to be the microfinance divisions of SBI,” he said.
In order to keep up with incumbent banks as also fintech players, traditional NBFCs must look to diversify their customer base as that offers scope for partnerships, he said. Private NBFCs have almost 84% of their exposure to large industries and commercial real estate, Setty said, and asked them to look at opportunities beyond this space. “This is the space which has landed you in trouble and you have to reinvent and go into the space which fintechs are actually rapidly expanding in. These are the areas where the incumbent banks will also be looking at partnerships.”
Co-lending and co-origination will be the way forward and NBFCs must be prepared for these opportunities. They must also look to build scale and increase their reliability in terms of governance and their forms of engagement with clients, Setty said.
However, NBFCs’ collection costs are not proving to be too cost-efficient either at 5-6% levels, Setty said, as this results in the blended cost being 13-14%. “…optically and politically, it will be difficult for people like us to be engaged with NBFCs (at such cost),” he said.
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