State Bank of India (SBI) expects to raise the share of the newly created business vertical — financial inclusion and micro-markets (FI&MM) — from the current 12 per cent to 20 per cent by March 2022.
The emphasis will be on enhancing income-generation work (deposits and loans) at around 8,000 branches under the FI&MM vertical. This will be completed once customer servicing — currently handled by the branches — is shifted to the business correspondents (BC) network to bring down the cost-to-income (C/I) ratio.
SBI had recently created a separate FI&MM vertical within the bank with an exclusive focus on rural and semi-urban areas to improve customer experience in the hinterland.
Under this newly launched vertical, the bank will offer loans predominantly for agriculture and allied activities and micro/small enterprises.
Around 8,000 branches in rural and semi-urban areas have been identified for providing specialised services to the micro-segment, including micro-credit for small businesses and farmers.
C S Setty, managing director (retail and digital banking), SBI, expects the bank’s FI&MM division to contribute 20 per cent to the business - covering both advances and deposits - by the end of the next financial year (March 2022).
The implementation of the FI&MM got delayed due to the back-to-back nationwide lockdowns imposed by the Centre to curb the spread of the novel coronavirus.
The bank will optimise the BC channel to manage costs better. The cost structure for branches under FI&MM will not be any different from the regular retail network.
Today, many of the 8,000 branches are engaged in servicing the customer where digital adoption is slower. “We will have the information technology (IT) to improve the performance of the BC channel,” added Setty.
It will leverage its BC network for collections and recoveries, and generate leads for agriculture gold loans.
These functions will need IT enablement. The bank will augment the technological wherewithal of the BC channel (with 66,508 outlets as of end-September) to reduce the burden on branches. So, customer acquisition and transaction cost will be vastly reduced. This is expected to bring down the FI&MM branch’s C/I ratio to 38 per cent, from the current 55 per cent.
At present, the bank has not decided upon a definite timeline to reach the 38-per cent level since the transition involves external features. The bank will factor in issues like training of BCs and then roll out the technology.