SBI's 'Chocolate' Strategy Yields Its First Recovery

State Bank of India has received its first full loan recovery under the pilot programme of tie-up with fintechs, according to a person with direct knowledge of the matter.

The scheme, popularly known as SBI's "chocolate" strategy, aims at improving recovery of loans through personalised visits to defaulting borrowers by representatives who convince them to repay their dues.

According to the person quoted above, a personal-cum-business loan worth approximately Rs 2 crore has been paid back in full.

In case of unpaid loans, the usual and first course of action that banks follow is reminders and updates to the borrower via phone calls.

In this particular case, SBI's own follow-ups with the borrower highlighted the legal issues the borrower may face if the default continues. According to the person quoted above, the borrower had even threatened to counter-sue the bank, if it went for legal recovery measures.

Here, the partners who visited, greeted the borrower with a pack of chocolates, which is one of the highlights of the pilot programme of tie-up with fintechs.

With the first full recovery, SBI plans to continue with the pilot for a few more weeks and then mull over how to make this an official recovery channel, the person quoted above said.

Recently, at the Global SME Finance Forum in Mumbai, Ashwini Kumar Tewari, managing director in-charge of risk, compliance and stressed assets at SBI, said that the bank was piloting a novel way of reminding its retail borrowers of their repayment obligations.

The bank has been working with two fintechs that use artificial intelligence to devise ways to recover loans.

"While one is doing conciliation with borrowers, the other is alerting us on the propensity of a borrower to default," Tewari said at the forum. "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."

The idea of carrying a pack of chocolates and visiting the borrowers has been adopted by the bank, as it was found that a borrower at fault, will not answer a reminder call from the bank, he said.

The bank has not officially announced the names of the two fintechs, but it is in conversations with few more to improve the collection efficiencies, Tewari said.

SBI's retail loan book stood at Rs 12,04,279 crore for the quarter ended June 2023. The book primarily comprises of personal, auto, education and home loans. According to data in SBI's analyst presentation, retail non-performing assets constituted 3.04% of the book. This is only second to the 3.42% NPA recorded in the corporate portfolio.