SBI aims to develop internal processes and structure in the SME space in order to improve market share/enhance the portfolio while maintaining asset quality, with the intention of being the banker of choice for MSMEs, according to the firm.
SBI aims to change the entire operating setup for lending to micro, small, and medium-sized enterprises (MSMEs) in order to boost processing time (TAT) and customer service while reducing bad loans. The bank has issued a request for proposal (RFP) for consultants to help with the process.
The bank mentioned in the tender document dated March 26 that it would like to increase its market share in this segment, which is currently at 15%. SBI aims to develop internal processes and structure in the SME space in order to improve market share/enhance the portfolio while maintaining asset quality, with the intention of being the banker of choice for MSMEs, according to the firm.
The paper shows some inconsistencies in the bank’s current operating flows. Since there is no interface with the fund’s portal, the credit guarantee fund trust for micro and small enterprises (CGTMSE) journey is completely manual. 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.
The bank wants to identify weaknesses in the end-to-end loan origination, approval, and monitoring process at the SME centre, and suggest improvements in process flow and end-to-end digitization for loans up to Rs 1 crore. They also want to shorten the time it takes to get underway and boost onboarding. In terms of RM enablement, the consultant will be expected to benchmark digital offerings of peers’ RMs and recognize areas of data collection that can be digitized and centralized, like making a digital tool accessible to operate 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 mitigations. 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 team of 1,770 Relationship Managers (RMs) who offer personalized services to MSMEs based on their needs. It operates a network of over 1,100 specialized SME and MSME branches. At the end of December 2020, its SME portfolio had risen 5.6 percent year on year (y-o-y) to 2.94 lakh crore. In the SME section, the NPA ratio was 6.85 percent, notwithstanding an interim judicial order not to recognize NPAs after August 31, 2020. Since then, the order has been lifted.