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Issue Highlights

Retail business surges at SBI

Intro: State Bank of India has been making serious efforts to achieve substantial growth in its loan portfolios. Rajnish Kumar, MD and GE (National Banking Group) gives details:

State Bank of India is the market leader in education loans with a market share of 23.5%. It is now using all its might to achieve growth target of 15% in home loans and 16-18% in car loans, in order to push the retail loan growth higher in the current FY. The bank’s retail advances increased from Rs249,259 crore in September 2014 to Rs291,043 crore in September 2015, registering a 16.76% yoy growth. As on 30 September 2015, about 5 lakh students have been extended education loans by the bank, amounting to an approximate outstanding of Rs15,806 crore. Total education loans sanctioned during 2015-16 till September 2015 were around 24,500 with 83% accounts for studies in India. The total amount sanctioned was around Rs2200 crore, with yoy growth being 3%.

Says Rajnish Kumar, MD & GE (National Banking) of the bank,: “We are the market leader in education loans with a market share of 23.5% amongst all scheduled commercial banks.”

The southern zone tops the bank’s in education loans during the last 3 years. The bank’s branches organize camps in the institutional areas to help students. As on 30 September 2015, about 2 lakh students from southern states have been extended education loans amounting to an outstanding of more than Rs6000 crore, says Rajnish Kumar.

The home loans extended by the bank as on September 2015 amounted to Rs170,899 crore, registering a growth of 7.32%. Home loans under priority sector formed 46% of the total home loan portfolio. “Population group wise distribution of our home loan portfolio is: metro 45%, urban 30%, semi urban 18% and rural 7%,” says Rajnish Kumar

The total number of car loans under personal loan segment extended as of Q2, 2015-16 is 138,524, amounting to Rs7697 crore. The customer friendly product, service level as per customer’s expectation, quick sanctioning, wide publicity via different media, etc, have helped to achieve this growth, says Rajnish Kumar.

The bank has reduced its interest rate by 25 bps with effect from 15 August 2015 which resulted in growth of car loans financed during August and September.


Students joining premier institutes like IIMs, IITs, NITs have been offered loans under SBI Scholar Loan Scheme carrying concessional interest rates. During 2015-16 till October 2015, the base rate has come down from 10% to 9.3%. “Loans up to Rs30 lakh are extended to students taking admission in 105 such premier institutions covered under the scheme. As education loans are linked to base rates, the benefit has been passed on to borrowers,” explains Rajnish Kumar.

The ministry of HRD launched an interest subsidy scheme for the benefit of students from economically weaker sections with annual gross parental / family income up to Rs450,000 under which interest on education loans for studies in India is funded during study and moratorium period for technical and professional courses sanctioned from the academic year 2009-10 onwards. Subsidy claims of around 11 lakh accounts were submitted during the period 2009-10 to 2014-15. Around Rs1000 crore was received and credited to the students’ accounts during the same period.

During FY 2015-16, home loan interest rates were brought down from 9.95% p.a. (women) and 10% p.a. (others) to 9.5% p.a. and 9.55% p.a. respectively.


There are many private players who have entered into car finance space. The bank has been evolving strategies to maintain its position: “We are continuously fine tuning our products and pricing to provide the best offer in the market. The same will be our strategy7 in future. We are also increasing our presence at dealerships. We will also focus more on digital marketing to capture young customers,” says Rajnish Kumar.

The bank has started using social media to promote its car loan products. It has introduced online customer acquisition solution for customers who are willing to apply online for car loans. Credit camps like loan mela and car utsav are regularly conducted at various centers pan-India on an on-going basis.

Other innovative ways and marketing plans include restructuring of delivery process with an aim to improve service experience levels and bring down the turnaround times and focus on builder tie ups. Says Rajnish Kumar: “Special camps are held in housing societies/ apartment blocks during week-ends – so as to meet all prospective customers. Credit camps are conducted on a regular / on-going basis depending upon business opportunity at the regional level. Tie-ups/ MoUs have also been entered into/ planned with third party lead aggregators, Realty firms, developers to source higher volumes of home loan leads and provide better information/experience to customers.”

The bank has introduced an Online Customer Acquisition Solution (OCAS) in May 2015. This application provides customers an online platform to apply for home loans. A customer can check his or her eligibility and get an in-principle approval for home loans within a few minutes. The bank has presence across all major social networking platforms. “In a span of 4 months, we have received over 30,000 home loan leads from OCAS. In order to ensure uniformity in communication with customers, all social media promotions are carried out using the official SBI profile only,” reveals Rajnish Kumar.


The bank’s auto loan NPAs for the last 3 years are: 1% as on March 2013, 0.79% as on March 2014 and 0.64% as on March 2015. The bank has taken a number of initiatives to contain NPA. Explains Rajnish Kumar: “SMS Alerts are being sent to borrowers before EMI due date and after EMI due date if EMI is not paid. Follow-up (soft-recovery) of Special Mention Accounts and NPAs is undertaken through tele-calling. We have arranged for auction of seized vehicles through organized malls. Regular in-house monitoring of NPA is done.”

The share of education loans’ NPA to the total NPAs as of 30 September 2015 is about 1%. “There are number of reasons for increasing NPA in education loans,” says Rajnish Kumar, adding “these being unemployment/ under-employment after completion of study due to lack of mobility in students, meagre income of parents, non-traceability of the borrower after course completion, non-availability of security to fall back upon in case of default of loans extended up to Rs7.5 lakh which are sanctioned without collateral security, lack of awareness among the borrowers regarding the repayment obligations as well as the severe after effects of non-payment.”

He says educating the students availing loans regarding the negative effects if the loan is not paid back timely is one of the main strategies of the bank to contain this. Besides, the bank also assesses the income-generating capacity of the student and fixes the repayment schedule accordingly. Also the bank has to maintain proper liaison with the students concerned continuously. He also points out that the government of India has launched a Credit Guarantee Fund Scheme which will provide guarantee for education loans up to Rs7.5 lakh, which are unsecured. This will provide some comfort to the lenders.

While the bank has a market share of 23.5% in the education loan segment, it is initiating steps to cut down delinquency. Rajnish Kumar saysin order to keep track of the employers where students who have availed of the loans are employed, the bank’s branches liaise with placement and alumni cells of the institutions. “We also monitor the credit behaviour of the borrowers by using the services of credit information companies,” he adds.

Home loans are the safest among the retail products because of the collateral security. The home loan portfolio of the bank has very low incidence of NPAs. Home loan NPAs have come down on a yoy basis. “This is mainly due to close monitoring and follow-up of slipped accounts at all levels, strict entry norms and comprehensive due diligence at origination, etc,” says Rajnish Kumar.


As per the Vision 2026 prepared by ICRA Management Consulting Services as an input for the Automotive Mission Plan 2026, passenger vehicle sales are expected to grow to 13.4 million units per annum from 3.1 million in FY14. It is estimated that the Indian auto industry will grow to 75.8 million units by FY 2026 as compared to 21.5 million units in FY14. Rajnish Kumar explains: “The plan expects the proportions of A and B segments (compact cars) to rise sharply in the next decade. It further anticipates India to be among the top three automotive markets in the world. Our target for 2015-16 is to achieve a portfolio growth of 15% over last year.”

The bank does not expect the market conditions to change drastically from the current levels in the short term. “However, in the medium term demand for home loans will increase with further softening of interest rates,” expects Rajnish Kumar.

Periodic customer satisfaction surveys / studies and number of complaints received from customers during a period are being used to measure customer satisfaction levels on an on-going basis by the bank. Customer retention strategies have been very effective with negligible reverse migration of customers to other banks / FIs, says Rajnish Kumar.

Maximum LTV of up to 90% of the project cost, earlier applicable only on home loans up to Rs20 lakh, has now been made applicable on home loans up to Rs30 lakh. Reduction in margin requirements for borrowers in the Rs20-30 lakh loan bracket will raise the demand for home loans in this segment. The bank expects a growth of about 16-18% in home loan levels during the current FY.

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