India’s largest lender, the State Bank of India (SBI), is taking an innovative approach to ensure timely repayments, particularly from its retail borrowers. They’ve devised a unique strategy of surprising potential defaulters with a delightful gesture – a pack of chocolates.
SBI discovered that borrowers planning to default often ignore reminder calls from the bank. Consequently, their solution is to make unannounced visits to these borrowers’ homes. This initiative aims to enhance collection efficiency, particularly in light of the growing retail lending sector and the rising delinquency rates due to increasing interest rates.
As of the June 2023 quarter, SBI’s retail loan book had surged by 16.46% to reach Rs 12,04,279 crore, making it the bank’s largest asset class. The bank’s total book size stood at Rs 33,03,731 crore, experiencing a 13.9% annual growth, with double-digit loan growth primarily driven by retail loans.
Ashwini Kumar Tewari, SBI’s Managing Director in charge of risk, compliance, and stressed assets, shed light on this novel approach. He explained, “With two fintechs that utilize artificial intelligence, we are piloting a unique method of reminding our retail borrowers of their repayment responsibilities. While one fintech works on conciliation with borrowers, the other alerts us to the likelihood of a borrower defaulting. For those borrowers who are at risk of default, representatives from this fintech will personally visit them, bearing a pack of chocolates for each borrower, and remind them of upcoming EMIs.”
Tewari emphasized that this approach was adopted because borrowers planning to default often disregard reminder calls from the bank. The most effective approach is to visit them at their homes unannounced, surprising them. So far, the success rate has been remarkably high.
Tewari did not disclose the names of the fintech partners, as the initiative is still in the pilot phase and was implemented only about 15 days ago. He noted that if it proves successful, they will make a formal announcement. Additionally, SBI is in discussions with several other fintech companies to further enhance collection efficiency, with plans to formalize partnerships with at least half of them by the end of the year. The bank intends to continue the pilot for at least four to five months.
SBI’s retail book, exceeding Rs 12 lakh crore, encompasses personal, auto, home, and education loans. Notably, with a home loan book of over Rs 6.3 lakh crore as of June, SBI stands as the largest mortgage lender in the country.
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