Banks looking beyond balance sheet financing: Rajnish Kumar, SBI MD


MUMBAI: Even as nationalised banks face the increasing pressure of bad loans a new way of lending may be emerging, a senior banker said Wednesday.

Banks are adopting new methods of financing like ecosystem financing, aggregation financing, supply-chain financing and internet-based financing in line with evolving corporate trends, Rajnish Kumar, Managing Director (National Banking Group), State Bank of India (SBI) said. Kumar was speaking at CII Entrepreneurship Summit.

“Earlier we used to lend based on the balance sheet size of a company at a time when big was being thought beautiful. That process is being phased out. To suit the changing needs of new entrepreneurs who have set an exciting pace for growth, we have evolved these new methods,” said Kumar.

Most of the banks have seen a huge jump in their non-performing assets (NPAs) or bad loans. Bad loans now stand at Rs 261834 crore according to the latest RBI figures. The NPAs saw a 56% jump in the December quarter and touched Rs 614,872 crore compared the same period a year before.

Under ecosystem financing, which was not heard of about 10 years back, all the stakeholders in the ecosystem will get funding ‘in a few minutes’. The same is the case with aggregator financing.

“We are now looking at cash flows of the company, instead of balance sheet size for sanctioning a loan. Besides, credit analytics is being built into the process. Corporate governance is an important factor in the assessment, on which our risk (of quality of accounting practice followed by the company) hinges,” said Kumar.