Disbursed Rs 34,000 crore worth of loans to SMEs using new data model, says SBI chairman CS Setty

SBI chairman chairman Challa Sreenivasulu Setty

Data will be the key driver of loans to small and medium enterprises (SMEs), State Bank of India chairman Challa Sreenivasulu Setty has told Moneycontrol in an interview.

The availability of data has also encouraged SBI to change its SME lending model. In the last nine months, the bank has devised a new methodology to assess loan demands and disbursed around Rs 34,000 crore, he said. This is approximately about 7 percent of the bank’s total SME loan book (Rs 4.96 lakh crore) as of December 31, 2024.

“In the last nine months, we rolled out a business rule engine, which is purely data-based. It uses the GST and income tax data and our own account data to assess the credit eligibility of an SME borrower,” the SBI chairman said.

Under this new loan underwriting mechanism, the bank gives in-principle sanctions for SME loans in 15 - 30 minutes.

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Setty said advances made in handling SME loans are due to the availability of data. While competition is fierce in this space, banks like SBI have an advantage as they have access and the ability to dig into data that can facilitate fast underwriting of these loans, he said.

“The customer has to come (on board) and give his/her consent to access the GST data, and submit income tax details,” he said. The availability of data is also encouraging SBI to change its SME lending model.

“We are trying to move from the collateralised lending to a cash-flow based lending guaranteed by the CGTMSE (credit guarantee fund trust for micro and small enterprises),” the chairman said, adding that the use of the business rule engine for SME loans is going to be a big game changer for SBI.

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“Availability of data is giving confidence to lenders to look at SME lending in a brighter way. The whole system is growing at 17–18 percent and some of the lenders are growing at over 20 percent, which means that there is some confidence coming into the system,” Setty said.

When he took over as the SBI chairman on August 28, 2024, Setty said SME loans were a subject very close to his heart and he would strive to smoothen the processes of SME lending. “MSMEs fall short on technology, market linkages and governance. If we can work with them to improve on these three aspects, the ecosystem can become a lot more robust,” he had said.