Indian bank finds unique way to tackle loan defaulters, it involves chocolates...

State Bank of India (SBI) has found an innovative strategy, that involves chocolates, in order to ensure timely repayments. This unique way by the country's largest lender is particularly to tackle loan defaults from retail borrowers, PTI news agency said. SBI is planning to greet borrowers at risk of defaulting on their monthly installments with a gift of chocolates.SBI observed that borrowers about to default often ignore reminder calls from the bank. As a result, SBI has decided to take a more personal approach by visiting these borrowers unannounced at their homes.

This move comes as retail lending in the banking system is on the rise, accompanied by an increase in delinquency levels due to rising interest rates.

In the June 2023 quarter, SBI's retail loan portfolio grew by over 16.46 per cent to ₹12,04,279 crore from ₹10,34,111 crore in the previous year.

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This makes retail loans the largest asset class for SBI, which has a total book size of ₹33,03,731 crore, growing at a rate of 13.9 per centyear-on-year.

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Handing out chocolates

SBI is collaborating with fintech companies that utilise artificial intelligence to implement this unique strategy.

When borrowers are identified as likely to default, representatives from these fintech firms visit them, carrying a pack of chocolates as a friendly gesture, and remind them of their upcoming installments to be paid.

Ashwini Kumar Tewari, managing director in-charge of risk, compliance, and stressed assets at SBI, reportedly said,"With two fintech firms which 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."

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Positive outcomes so far

According to Tewari, this approach has yielded impressive results.

However, the bank has not disclosed the names of these fintech partners as the initiative is still in the pilot stage, having commenced just 15 days ago. Tewari mentioned that if successful, SBI will formally announce the partnership.

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Future expansion of initiative

SBI is also exploring collaborations with other fintech companies to enhance their collection efficiency.

"We are also talking to a few other fintechs 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," he said, adding, "we want to continue the pilot for at least four to five months."

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