State Bank of India's latest target: Rs 4-trn SME loan book by March 2024

State Bank of India (SBI) plans to overhaul its business model and strategies for loans to micro, small, and medium enterprises (MSMEs) to increase its market share to 20 per cent by March 2024, from over 15 per cent at present. This will require SBI to grow its SME loan book to Rs 4 trillion, from the current Rs 2.5 trillion.
 
Saloni Narayan, deputy managing director (retail business), SBI, said the bank’s market share has grown in deposits to 23 per cent and in advances to 20 per cent. But the worrisome part is the secular decline in the market share of the SME book. In fact, it has shrunk from 20 per cent five years ago.
 
However, FY21 has been better for this segment for various reasons, including the guaranteed emergency credit line (GECL).  The SME loan book has grown by an estimated Rs 24,000 crore and market share has surpassed 15 per cent, Narayan said.
 
Narayan said the bank felt the need to reorient strategy to look at ways to improve its position in light of the huge potential of this segment. It will rope in a consultant to redesign the operating model and implement the new strategies to achieving growth in the MSME segment, while ensuring asset quality is maintained. Around 2,300 corporate houses bank with SBI, and the ecosystem is huge for vendor and retailer financing, and cluster financing, where too the bank needs to enhance its presence. SBI has conducted an assessment of pain points in turnaround time and why MSME customers do not choose SBI over others.  “We want to become the bank of choice in the segment,” she said.

 
SBI has a network of over 1,100 specialised SME intensive and MSME branches in the country, run by a team of trained relationship managers (approximately 1,770). Last year, the bank also posted one assistant general manager in every zone (81 in total) to maintain relationships with the SME customers.
 
It has become easier to do business, especially in the SME banking space, with rising pace of formalisation. Also, the bank is sitting on a huge pile of data and is the largest lender in government-backed schemes. This has led it to look at the SME business in a focused manner.
 
 This segment is more profitable (in terms of return on assets) than the big-ticket corporate space as the lender enjoys pricing power because of its ability to provide timely and quality support to clients, pointed out another senior SBI executive.