SBI setting up cells for quick retail loan sanctions

The State Bank of India (SBI) is setting up specialised cells to sanction retail loans fast and thereby crunch the turnaround time i.e., the time between the application letter and the sanction letter for a loan to within a week.

Following a business re-engineering exercise by consultancy firm, McKinsey & Co, SBI plans to set up 50-60 retail assets centralised processing cells, which will specialise in faster sanctioning of retail loans.

The pilot cell was set up in Juhu, a western suburb of Mumbai and a national footprint is to be established by year end, said officials.

Through these specialised cells the bank aims to bring down the turnaround time for loans considerably.

The turnaround time for housing loans is expected to reduce to six days, that for education loans to five days and that for car loans to three days. Currently SBI is said to take about eight to nine days for sanctioning a housing loan.

Private players like ICICI Bank are known to sanction loans in a matter of 24 hours particularly in the case of car loans. SBI's new set up is likely to make it more competitive in the fast growing and fiercely competitive retail market.

Each of SBI's retail assets centralised processing cells will receive all the retail loan applications from the nearby branches and will focus only on appraisal and sanctioning of loan proposals. The cell will be headed by a chief manager or a assistant general manager.

The branches of SBI will then focus mostly on marketing of loans while the back office work will be handled by the retail asset centralised processing cells.

This is similar to the model adopted in most of the private sector banks which run their branches as marketing set ups. The retail book size of SBI was at Rs 36,931 crore as at end of August 2004 up Rs 3,791 crore from March 2004 levels. It aims to grow its outstandings by Rs 11,000 crore in this financial year.

Housing loans, the largest constituent in the retail book, was at Rs 19,778 crore as on August end up Rs 2,697 crore from March 2004 levels. Retail as a part of total assets constituted over 22 per cent of total assets in March 2004.

Last year SBI introduced the single window service concept in over 7,400 branches in an effort to enhance customer satisfaction.

The retail finance sector has been booming at over 30 per cent for two years consecutively in India and the momentum is expected to continue with retail loans as a percentage to GDP at a mere 5 per cent.