SBI to speed up loans, forms lending wing

New McKinsey report for business process reengineering

The State Bank of India is streamlining its loan sanction process to pare the time for sanctioning loans to 30 days.

For this, the state-owned bank has eliminated the discretionary powers of its executives and has set up a centralised loan processing cell for all credit proposals involving over Rs 2 crore.

"We will bring down the loan sanctioning time further to two weeks," said Chandan Bhattacharya, managing director of the bank.

Quicker loan sanctioning is but one side of a business process re-engineering exercise that the country's largest bank has embarked upon. The exercise is being implemented by consultancy firm McKinsey & Co.

Nearly eight years after the State Bank of India created a corporate accounts group to deal with high value (over Rs 100 crore) corporate loans, the bank is also setting up a mid-corporate wing to tackle loan proposals worth Rs 10 crore and above, but below Rs 100 crore.

In effect, the corporate accounts group has been a bank within a bank. With the mid-corporate wing, the bank is now virtually creating another one.

"In 1995, McKinsey recommended setting up the corporate accounts group. It also recommended changes in the reporting structure. This time, it is a business process re-engineering exercise. However, if the changes in business processes call for an organisational restructuring, it will be done," Bhattacharya pointed out.

The bank last month created the post of chief general manager to oversee the mid-corporate wing. V K Gupta, the former SBI Factors chief, has been appointed the chief general manager.

In due course, the bank likely to have a deputy managing director or even a managing director overseeing the new division.

Right now, both the corporate accounts group and the mid-corporate wing report to Bhattacharya while the retail and priority sector lending functions are overseen by another managing director. Corporate credit accounts for 50 per cent of the bank's assets; retail and priority sector loans form the other half.

Unlike the corporate accounts group, which operates from five centres (four metros and Ahmedabad), the mid-corporate wing will be set up in at least 12 cities in the country. The pilot project will start in June.

An internal study has identified 39 industries to which the bank can increase its exposure. It has also suggested that the bank should go slow on lending to three industries. The list of industries has been circulated to all the branches.

"Since we have standardised the loan sanctioning process and centralised the appraisal process, any proposal that comes from the 39 industries will get almost automatically cleared if the company is in good shape. We have started seeing the results. The bank's non-food credit is growing 16 per cent year on year. The last time this kind of growth was seen was in the mid-1990s," said Bhattacharya.

In another development, the bank has established in-house teams to work with big companies on developing customised financial products.

These teams comprise an executive each from the corporate accounts group and the treasury division of the bank, from the bank's merchant banking arm SBI Caps and from its mutual fund outfit, SBI Mutual Funds. Thirty such teams are now working with big corporates. By end of the year, about 100 such teams will be in place.

"We are offering companies all options. For instance, if they want money, we can give them funds at competitive rates. If they have short-term liquidity, they can park it with SBI Mutual Fund," said Bhattacharya.

The bank is, in fact, following its clients across the globe. "Be it a greenfield project or an acquisition abroad, we are with them. To cite a few instances, we are funding Wockhardt's acquisition of a German company and Aurobindo Pharmaceutical's foray into China," the managing director said.

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The behemoth's new face

• Mid-corporate wing to cater to Rs 10 crore - Rs 99 crore loan proposals
  
• Centralised loan processing cell to vet all proposals
  
• Standardised credit sanctioning format eliminates the exercise of discretionary powers
  
• All loan proposals to be cleared in 30 days
  
• The Sate Bank of India to go the whole hog in lending to 39 industries, to slow down lending to 3 industries
  
• In-house teams working with 30 companies to develop products