State Bank of India, the country’s largest lender, is innovatively encouraging on-time repayments, particularly from its retail borrowers, by offering a delightful surprise in the form of a pack of chocolates to those who may be at risk of defaulting on their monthly installments, according toPTI.
As per the bank’s findings, borrowers intending to default tend to ignore reminder calls from the bank. Therefore, the most effective approach is to conduct surprise home visits.
This initiative, designed to enhance collection efforts, is being implemented in response to the growing volume of retail lending in the financial system, which is accompanied by a rise in delinquency rates due to increasing interest rates. The bank’s retail loan portfolio expanded by an impressive 16.46 per cent, reaching ₹12,04,279 crore in the June 2023 quarter compared to ₹10,34,111 crore in the corresponding period of the previous year. This growth solidified its position as the lender's largest asset class, while the bank's overall portfolio stood at ₹33,03,731 crore, reflecting a 13.9 per cent year-on-year increase.
In fact, within the entire system, the robust double-digit loan growth of approximately 16 per cent has been primarily driven by retail loans.
Ashwini Kumar Tewari, Managing Director in charge of risk, compliance and stressed assets, SBI said, “With two fintechs that use artificial intelligence, we are piloting a novel way of reminding our retail borrowers of their repayment obligations. While one is doing conciliation with borrowers, the other is alerting us on the propensity of a borrower to default. And to such borrowers who are likely to default, the representatives from this fintech will visit them, carrying a pack of chocolates for each of them, and remind them of the forthcoming EMIs.”
According to Tewari, this innovative approach of delivering a pack of chocolates and making personal visits is implemented because it has been observed that a borrower contemplating default is unlikely to respond to a reminder call from the bank. Therefore, the most effective strategy is to make unannounced home visits and take them by surprise. Thus far, the results have been remarkably successful.
Tewari declined to disclose the names of the fintech companies, stating that the initiative is currently in the pilot stage and was initiated approximately 15 days ago. He mentioned that if it proves to be successful, they will make a formal announcement.
Tiwari added, “We are also talking to a few other fintech to improve our collection efficiencies and hopefully by the end of the year, we will have formally tied up with at least half of them. We want to continue the pilot for at least four to five months.”
SBI's retail portfolio, which exceeds ₹12 lakh crore, encompasses various loan categories, including personal, auto, home, and education loans. With a home loan portfolio exceeding ₹6.3 lakh crore as of June, SBI holds the distinction of being the largest mortgage lender as well.
