The State Bank of India (SBI), the largest public sector lender, has devised a unique strategy to tackle potential loan defaults. Recognizing that borrowers planning to default often ignore reminder calls, SBI is taking a proactive approach by personally visiting their homes unannounced and surprising them with a pack of chocolates. This innovative method is aimed at improving loan collections, particularly as SBI’s retail lending has experienced substantial growth.
SBI’s retail loan book has witnessed remarkable growth, surging by over 16.46 percent to reach Rs 12,04,279 crore in the June 2023 quarter from Rs 10,34,111 crore in the previous year.
To enhance its loan recovery efforts, SBI has partnered with fintech companies that utilize artificial intelligence (AI) technology. These fintech platforms play a dual role: one focuses on negotiating with borrowers, while the other assesses a borrower’s likelihood of default.
In the case of borrowers who are identified as likely to default, representatives from the partnering fintech visit their homes with a pack of chocolates in hand. This personal visit serves as a reminder of upcoming monthly installments, and the unexpected nature of the visit aims to catch the borrower’s attention effectively.
SBI reports that this unconventional approach has yielded impressive results so far, significantly improving the success rate in recovering overdue loan payments.
While SBI has not disclosed the names of these fintech partners, the initiative is currently in the pilot phase, having been implemented just 15 days ago. The bank intends to formally announce the program if it continues to prove successful. Additionally, SBI is in discussions with other fintech firms to enhance its loan collection efficiency and anticipates partnering with at least half of them by the end of the year.
SBI’s extensive retail loan portfolio includes personal loans, auto loans, home loans, and education loans. With a home loan book exceeding Rs 6.3 lakh crore as of June, SBI stands as the largest mortgage lender in the country.
The Ministry of Finance has praised the significant improvements in the performance of public sector banks (PSBs) as a result of banking reforms undertaken by the central government. These reforms have addressed issues such as credit discipline, responsible lending practices, improved governance, and the adoption of technology.
As a direct outcome of these reforms, the Ministry of Finance highlights several positive metrics for PSBs, including a significant decline in the Gross Non-Performing Asset (NPA) ratio from 14.6 percent in March 2018 to 5.53 percent in December 2022. Furthermore, the capital adequacy ratio of PSBs has improved, and all PSBs are operating profitably.
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