Fin Min asks banks to be more customer-friendly

Mumbai: Union Finance Minister Nirmala Sitharaman on Monday said banks need to focus more on being customer-friendly so that the process of availing credit becomes more hassle-free for borrowers.

However, the minister made it clear that banks do not have to be lenient on credit underwriting standards by taking any adverse risks on a proposal.

At a meeting between industry representatives and the finance minister, a startup founder in the baking business suggested for credit to be available hassle-free, to which largest lender SBI's Chairman Dinesh Kumar Khara said a startup's worries are more on the equity side and assured full support in lending if sufficient equity is on the table.

Later, he also made a mention of the government's Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE).

Stressing that the person asking the question is a woman operating an innovative enterprise, Sitharaman had a few suggestions for the banking community and also spoke out against their attitude.

"Initially, Mr Khara gave a very bland answer. And then after being prompted somewhat, he went into talking about a scheme which has a lot of government support, the CGTMSE," she said. "Banks will have to be a lot more customer friendly. Not to the extent of taking adverse risks which you don't need to take, but you need to be a lot more friendly to customers," the minister said.

Khara said the focus is on increasing the reliance on end-to-end digitalisation of the process, which will ensure a hassle-free experience.

He said in the next two months, the bank will go fully digital for lending. Also, provided there is credible cashflow visibility available to a bank, the credit growth to small businesses can touch that of personal loans over time.

Khara said it is a normal perception that banks do not sanction loans, but pointed to very high levels of underutilisation of sanctioned working capital limits, which generally point to slowing demand in an economy.

He said even after a 9 percentage points improvement in a quarter, the underutilisation of working capital is as high as 52 per cent for the country' largest lender.

Finance Minister emphasised that trust and confidence in the financial markets are critical to gain traction among investors.

During an interaction with leaders of the financial and capital markets here, Sitharaman also asked them to explore ways to further strengthen the sector, according to an official release.