SBI to revamp MSME lending ops to increase efficiency

There are four verticals in SBI’s MSME lending operations — SME Centre and relationship managers, supply chain finance, CGTMSE and cluster financing.

State Bank of India (SBI) plans to revamp its entire operational setup for lending to micro, small and medium enterprises (MSMEs) with a view to improve turnaround time (TAT) and customer experience while keeping bad loans in check. The bank has floated a request-for-proposal (RFP) seeking bids from consultants to carry out the process.

In the tender document dated March 26, the bank said that it would like to increase its market share in this category, which currently stands at 15%. “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 reveals certain gaps in the existing operational flows of the bank. For instance, the credit guarantee fund trust for micro and small enterprises (CGTMSE) journey is entirely manual as there is no interface with the fund’s portal. The bank says that there has been poor offtake in this segment and there is a need to identify deficiencies in on-boarding which are resulting in high non-performing assets (NPAs). SBI also needs to develop analytics tools to generate supply chain financing business from its existing current account (CA) base.

There are four verticals in SBI’s MSME lending operations — SME Centre and relationship managers, supply chain finance, CGTMSE and cluster financing.

At the SME centre, the bank wants 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. They are also looking to reduce the TAT and improve on-boarding. In terms of the relationship manager (RM) enablement, the consultant will be required to benchmark digital offerings of RMs of peers and identify areas of data obtention that can be digitised and centralised, including making available a digital tool to work from anywhere.

In the supply chain finance (SCF) vertical, too, SBI wishes to benchmark current dealer/vendor financing SCF journeys with the “best-in-class world players and identify gaps.” The consultant will be required to develop value chain analytics capabilities, including an analytics framework on the lack of transaction flows of the existing current account (CA) base to generate leads for vendor and dealer onboarding.

The consultant will be tasked with identifying the reasons for poor offtake in CGTMSE schemes and suggesting measures for improvement. They will also have to identify deficiencies in on-boarding which could be hurting asset quality.

In cluster financing, the bank wants to build in risk mitigants. It expects the consultant to suggest a co-ordination mechanism with various government agencies for increased thrust in the cluster portfolio.The consultant will also be expected to bring in new fintechs for partnering with the bank, among other things.

SBI has a 1,770-strong team of RMs to provide specialised services to MSMEs as per their requirements. It has a network of more than 1,100 specialised SME intensive and MSME branches. Its SME portfolio grew 5.6% year-on-year (y-o-y) to `2.94 lakh crore at the end of December 2020. The NPA ratio stood at 6.85% in the SME segment amid an interim judicial order to not recognise NPAs after August 31, 2020. The order has since been lifted.