According to chairman Dinesh Khara, the State Bank of India (SBI) may achieve its target of a Rs 4 trillion loan book for the SME category by March 2023 rather than the prior target date of March 2024 established by the bank. According to him, a number of efforts over the last year have contributed to the segment’s increased rise.
According to the current state of affairs, we should be extremely close to attaining Rs 4 trillion by March 2023, but that was the goal that had been established, Khara added.
As of December 31, the bank’s SME book has grown 14.2% year over year to Rs 3.51 trillion, accounting for 11% of the entire loan book.
Balance sheet-based lending has been a focus of the bank’s investments in terms of infrastructure and capacity building for distribution financing and vendor credit. Through Yono, SBI has also begun to offer pre-approved business loans that are given after an analysis of the borrower’s current account activity. Khara said that this product was gaining a lot of traction.
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“SME lending has developed into a consistent priority area, and we are conscious of our lending quality. The bank has developed a loan management system that gives us visibility into unstructured data via GST, for example,” the guy stated.
According to Khara, the bank has improved its SME underwriting procedures and made investments in both people and products as a result of which the rise in the SME book is anticipated to be sustained.
On the corporate side, the bank has a credit pipeline totaling Rs 3 trillion, which includes Rs 1.1 trillion in term loans and working capital use that has not yet been accessed. In Q3FY23, the bank’s corporate portfolio increased by 18% year over year to Rs 9.3 trillion, with the infrastructure and services sectors receiving the majority of the loans. While loans to the telecom industry decreased by 17%, the infrastructure loan book increased by 5.6%, driven by the electricity, highways, and ports segments.
“One encouraging trend is the significant decline in the non-availability of term loans, which often portends well as working capital improves after that. Even if the availability of operating capital has decreased, the major corporation category has experienced a 24% increase in sanctioning, according to Khara.
The bank wants to increase the foreign loan book’s net interest margin (NIM), which as of December 31 was 1.26%. In monetary terms, the bank’s overseas portfolio increased by 9.15% in the third quarter of FY23, and its borrower profile comprises both domestic and Indian corporations. Loans to domestic businesses are made through the syndicate mechanism, whilst loans to the overseas subsidiaries of Indian businesses are made through external commercial borrowings.
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The bank may consider raising money using market instruments, such as infrastructure bonds, in addition to generating deposits because they are less expensive. Infra bonds have already been used by the bank to raise money. According to Khara, the bank’s capital adequacy ratio would be at 14.5% by the end of Q4FY23, and at that level, it can support credit growth of at least Rs 7 trillion.