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    Bank of Baroda bets on new digital platform to expand retail lending

    Synopsis

    BoB has offered 1.25 lakh loans so far, roughly 80% od which are personal loans. The personal loans are capped at Rs 50,000 and are currently offered to only the bank's customers. Handa said BoB plans to increase the maximum ticket size to Rs 2 lakh and also offer the loans to non customers of the bank before the end of the month.

    bank-of-barodaAgencies
    BoB's push into retail comes even as the job and salary cuts caused by the Covid-19 pandemic has increased fears of loan defaults especially in the uncollateralised personal loans.
    State-owned Bank of Baroda (BoB) is making a bold move to expand its retail lending through a self made digital lending platform which assesses credit risk through varied public and private data points like bank account statement, tax statements and consumption trends.

    Akhil Handa, head fintech and digital lending said the bank has already disbursed Rs 1000 crore through this new platform since it was launched at the end of November and expects half of the bank's retail loans to be originated through this platform by the end of the fiscal ended March 2022.

    BoB has offered 1.25 lakh loans so far, roughly 80% od which are personal loans. The personal loans are capped at Rs 50,000 and are currently offered to only the bank's customers. Handa said BoB plans to increase the maximum ticket size to Rs 2 lakh and also offer the loans to non customers of the bank before the end of the month.

    "The programme was targeted to a very narrow base when it was launched. We have 14 crore liability customers which we could look at by using their vintages like screens, balances and churns. We have now seen repayments in it for three to four months and it gives the confidence that its working fine. Of course we still have to season it but we are at a level that can be scaled up further," Handa said.

    The bank will use over 1200 data points and a 100 digital documents like income proofs, income tax returns and a bank statement which is mandatory.

    "There are 50 external integrations like utility bills, mapping addresses and 50 internal integrations including fraud reports that we have done to built a data profile around the customer....It is a risk based dynamic approach...not everyone will be requested for everything...bank account statement will give us a purchase history, income profile, ability to repay...if I am unable to built some of those I will ask for more," Handa said claiming that BoB is the first to use a completely digital lending for new to bank customers.

    BoB's push into retail comes even as the job and salary cuts caused by the Covid-19 pandemic has increased fears of loan defaults especially in the uncollateralised personal loans.

    BoB CEO Sanjiv Chadha himself had warned about rising stress in retail and micro, small and medium enterprises (MSMEs) in a conference call following the bank's third quarter results.

    However, Handa the bank's experience in the last three months makes him confident of these loans.
    To be sure at just Rs 1000 crore the current loan book build through this platform is just above 1% of its Rs 1.16 lakh retail loan book.

    However BoB also plans to launch new digital lending products for MSMEs over the next one month including loans up to Rs 10 lakh under the Mudra scheme and also gradually move all yearly MSME renewals online.

    "We expect 50% of our retail origination and 25% to 30% of SME loans by amount to happen digitally by FY22," Handa said. Currently about 18% of retail loans are done through this platform.

    BoB's move comes even as RBI has clampdown on non bank digital lending platforms cautioning the public against the use of “unauthorized” lending apps and reiterating that only RBI licensed banks and NBFCs can participate in lending activities.


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