Banks like SBI well versed to handle acquisition financing: C S Setty

Mumbai, Oct 8 (PTI) Days after the Reserve Bank's decision to allow banks to allow acquisition financing, SBI chairman C S Setty on Wednesday said entities like the country's largest lender are "well versed" to handle the upcoming line of business.

He said the shift to an expected credit loss (ECL) based system of asset provisioning will not impact the balance sheets of banks, given the extended transition period given by the central bank.

"We have been doing outbound merger and acquisition financing for Indian corporates acquiring overseas entities. I think banks like SBI are well versed in acquisition financing," Setty told reporters on the sidelines of the annual Global Fintech Fest (GFF) here.

It is worth noting that the Reserve Bank had announced a decision to allow banks to engage in acquisition financing, following a public request made by Setty itself a few weeks ago.

On the ECL, where the central bank announced the final guidelines on Tuesday, the SBI chairman said the country's largest lender is technologically ready in terms of models, but some adjustments may still be required.

"The long transition time that is given, we believe that there will be limited impact on the balance sheet of banks," Setty said. The shift to ECL from the current post-loss provisioning will commence in FY27, and banks have been given a five-year period for a complete transition.

Meanwhile, speaking at the fest, Setty said there is a need for banks to improve the collection capabilities for credit disbursed through the Unified Payments Interface (UPI).

He said that from a disbursement perspective, the UPI platform presents several strengths due to its ubiquitous presence and the data it delivers.

Setty pointed out that SBI is working on developing a receivables-based vendor financing option for merchants who use UPI.

The bank, which serves 52 crore customers, is also exploring the use of UPI for disbursing farm loans by linking the Kisan Credit Cards (KCCs) with the RuPay UPI credit solution.

He said 34 per cent of the outstanding Rupay UPI credit cards are issued by its subsidiary SBI Cards, and the same accounts for 16 per cent of the spends.

Listing out the gains made by SBI through the PM Jan Dhan Yojana, where it has onboarded 150 million customers, Setty said that credit delivery has not picked up as much through these accounts and mentioned that the business correspondent network across the country can be utilised for extending loans.

Over 99 per cent of the 150 million accounts have some balances, Setty said, adding that the average account balance stands at Rs 4,000. These accounts witness 35 lakh transactions per day, and 56 per cent of the accounts are used by women, he said.

In comments that come years after a large rival faced problems while transitioning to a new app and interface, Setty said the upcoming version of its popular Yono app will have the ability to onboard 20 crore customers on day one.

The bank is working with 12 fintechs in building the new version, he said, adding that the uses of the app go beyond mobile banking.

The Yono app has helped reduce the time taken to onboard a customer to as little as 15 minutes, down from an hour earlier, he said.

Setty also stated that efforts are needed to simplify Know Your Customer (KYC) compliance in the banking system and added that SBI is engaged with the government and regulators towards this goal. PTI AA DRR