SBI uses tech to grow its personal loan portfolio 2.5x in under 3 years

Mumbai: State Bank of India (SBI) has finally cracked the retail lending code, so far considered the domain of private sector banks. Data analytics and a targeted penetration of government salary accounts resulted in a two-and-a-half times jump in its unsecured personal loan portfolio in less than three years.

India's largest lender, long known for corporate loans, has now built a ₹2.40 lakh crore personal loan book called Xpress Credit with just 0.60% non-performing assets (NPAs), making it the second biggest individual loan segment for the bank behind home loans, and up from ₹1.04 lakh crore at the end of March 2019.

SBI's vast 23,000-branch network, data analytics-driven processes along with robust demand for these loans has made the bank confident of increasing this book to above ₹3 lakh crore by December 2022, said Saloni Narayan, deputy managing director - retail, in an interview.

She estimates the personal market in India to be worth ₹7 lakh crore currently, growing at 20% per annum.

"We used the disruption caused by the pandemic to set up a retail loan management software (RLMS) system, which uses customer data from various sources and credit bureaus to give an on-the-spot appraisal within eight minutes. During the pandemic, since many of our staff were working from home, they were given a list of prospective customers using this analytics, which also played a big part in this growth," Narayan said

SBI has 17.5 million corporate salary accounts, 90% of which are of employees of state, central government, defence related or public sector companies, jobs that are considered safe and where salary cuts are rare.

Narayan said customers took these loans to meet short-term consumption requirements during and after the pandemic. High demand for these loans has also led to an increase in ticket size to more than ₹5 lakh currently from less than ₹3 lakh a couple of years ago.

"This is now a focus product in retail banking due to its higher profitability. We are increasing the maximum loan amount to ₹35 lakh from ₹20 lakh to cater to the ever-increasing demand. Our analytics systems and collection mechanisms have become better as we have processed more of these loans. We expect the pace of growth to continue," Narayan said.

To be sure, the bank's NPAs increased to 0.71% in December 2021 from 0.37% in March 2021 mainly due to Covid-related deaths of borrowers and irregular salary credits in some accounts but Narayan said the bank has been able to reduce NPAs to end the current fiscal at 0.60%.

"We have realised that regular reminders and phone calls if we see an account showing delinquent tendencies goes a long way in reducing NPAs and making payments regular. In fact, a majority of customers pay back within three years for these loans, which typically have a five-year tenure, making them eligible for larger loans in the future. All these observations make us more and more confident about this product," Narayan said.

The sharp rise in these loans has also led to an increase in the share of retail in SBI's loan book to 42% of total loans from 32.5% in March 2019. Home loans though continue to be the largest segment within retail at ₹5.38 lakh crore.

Narayan said improvement in business and economic environment, young population and rising salaries will ensure the Xpress Credit portfolio keeps growing.