SBI ready with micro market plan, soft launch on June 1

KOLKATA: India’s biggest financier is stooping to conquer.

State Bank of India (SBI) is all set to activate its micro market vertical from June to raise its stake with the bottom-of-the-pyramid borrowers, and it has asked SBI Life Insurance chief executive Sanjeev Nautiyal to head the initiative.

The country’s largest lender is going ahead with its plan to launch the specialised cell for small borrowers despite rising odds against that line of lending in the aftermath of the Covid-19 outbreak. About 7,500 rural branches of SBI will be at the vanguard of this initiative.

SBI chairman Rajnish Kumar said that the bank would do a soft launch on June 1.

The last-mile connect would be SBI’s response even as opportunities in both wholesale and retail loan markets shrink, with the economy set to contract. SBI’s group chief economic advisor Soumya Kanti Ghosh predicted the economy to contract 6.8% in FY21.

The state-owned lender has already formed a vertical — Financial Inclusion & Micro Market (FIMM) — to handle its microfinance business. Deputy managing director KV Haridas, who has been in charge of FIMM until now, will be retiring on May 31.

ET had first highlighted SBI’s micro market strategy on March 12.

“The bank already enjoys over one-third of the market share in both the home loan and car loan segments. Now it has decided to concentrate on the micro market,” a senior SBI official said.

While state-owned lenders have been in the business of lending to self-help groups for nearly three decades, SBI would be the first to foray into the collateral free micro loans to street vendors, zari workers and tailors, which was popularised by Muhammad Yunus of Bangladesh. About one-fourth of Indian microfinance market of Rs 2.22 lakh crore is controlled by Bandhan Bank.

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However, SBI is yet to put in place a collection mechanism, which is the key to success in microfinance. It plans to use its existing business correspondent partners to begin with.

While economic activities remain subdued due to lockdown, banks are trying to up the ante to in the districts where the spread of the virus was negligible or could be restricted.

Until the second week of May, 56% of the country’s districts were in green and orange zones. The balance 44% was classified as a red zone, which included areas that faced significant operational curbs.

Rating firm ICRA said that most of the bigger microfinance firms and small finance banks have more than half of their portfolio in the green and orange zones, where turnaround is expected to be faster and collections higher than in the red zone.


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