News & Analysis

Public Sector Banks Eye Data Analytics, Finally! 

An RBI report recently called out the declining ratio of industrial loan to total credit in the Indian banking system

Two stories caught our attention in today’s papers. The first of these related to the Reserve Bank of India (RBI) notifying that the ratio of industrial loans to total credit continued its declining trend over the decade. The other relates to a report that the public sector banks are making a shift towards data-driven decision-making by setting up dedicated big data analytics verticals. 

Of course, many of us using the public sector banks would have experienced the arbitrariness of their decision-making (not that private banks are any better in this regard). What makes this a weird proposition is that these banks are now considering dedicated verticals for big data and analytics in order to integrate all data sources. 

If you didn’t get the joke, here it is: The Indian IT industry as represented by the likes of TCS, Infosys and Wipro, have been traditionally going across the world selling their BFSI solutions to anyone and everyone in the business. As is the case with the likes of Microsoft and Oracle. So, what made our banks arise from their slumber now? 


What does the RBI data showcase now?

Is it the information shared by the RBI? For the records, the central bank said that according to the Basic Statistical Return on Credit by Scheduled Commercial Banks (SCBs) in India – March 2022, both industrial and personal loans had nearly 27% credit share each in March 2022. After dropping the previous year, loans to the industrial sector saw a 4.7% increase in FY22. 

While credit demand from the retail industry has become robust in recent years, the portion of small-sized loans has also gone up in a steady fashion. Also, the share of loans under Rs.1 crore grew nearly 48% in FY22 from 39% five years ago, while loans above Rs.10 crore declined by almost 40% during the period from about 49%. 

Share of loans below 7% interest rate rose to 23.6% but the public sector bank’s total credit among scheduled commercial banks was 54.8% in March compared to 65.8% five years ago and 74.2% a decade back. During this period, private banks’ shares doubled to 36.9%. No wonder then that the PSBs want to follow in the footsteps of the private banks! 


Small wonder that PSBs are feeling left out

So, what’s the proposal all about? State-run banks will set up dedicated verticals for big data and analytics, and integrate all data sources, a move that follows the government’s directive to lenders to strengthen data-driven, integrated and inclusive banking. Over the next 12 months, these banks will roll-out digital only products and services designed for minimum data entry, automated checks and underwriting for retail customers and the SMBs. 

These banks plan to expand their portfolios of end-to-end digitized banking services and introduce digital banking solutions for value chain financing. There were some reports that the RBI has also come up with a program to present a revamped Kisan Credit Card scheme that can be used by banks to deliver loans at the farmgate. 

Through the data-driven approach, these banks are seeking to reach the customer faster and stave off competition from both private banks as well as the fintech players who’ve created a shakeup in the lending businesses, especially to the individuals. The idea here is to create a database that could be referred for lending, legal processing and recoveries. 

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