Bank of Baroda news: Bank of Baroda to completely digitise lending operations

Mumbai: India’s third largest lender Bank of Baroda is set to completely digitise it’s lending operations including home, agriculture, MSME, personal and auto loans. The bank which is looking to completely do away with paper-based lending has reached out to the big four and some white shoe consultants like McKinsey and Boston Consulting Group to help set up a “digital lending department”.

The validation and disbursal of fresh loans will happen via this digital platform while past loans will also be digitised to cut costs and improve profitability. The bank is planning to digitise a large proportion of its retail and MSME processes in the next six months.

“The bank intends to set up a digital lending department within the bank and end-to-end digitisation of loan processes,” the 75-page proposal document shared by the bank to prospective consultants read. “To augment and strengthen its position as one of the foremost lenders in the country the bank is looking to significantly increase its focus on digitally enabled lending especially in retail, MSME and agriculture segments.”

A detailed questionnaire sent to Bank of Baroda on Friday did not elicit any response.

As per a 18-month action plan laid out by the bank, it’s aiming to set-up and operationalise the digital lending department within two months. A later leg of the plan includes consolidating the bank’s ongoing digital initiatives within this new set up. After which the department will be integrated across the bank’s systems.

While the digital interface has been in the works, people in the know said that the spread of the pandemic and it’s fallout has hastened the process.

“Covid has thrown up the need for a fully digital interface where loan validation, pre-approvals, disbursals all happen digitally, this will take a few-months to implement but once active it would help the bank substantially scale up its lending operations,” an official in the know said on the condition of anonymity.

According to the people in the know, the eligibility criteria for selection are so stringent that most of the consultancies may not even be able to apply. It is expected that the state-run lender may select one of the white shoe consultancies such as Boston Consulting Group (BCG) or McKinsey for the project. McKinsey refused to comment on the story, BCG did not respond to ET.

“The push for digitisation is the result of the recent mergers. There is a push from the government to increase retail lending, and during the Covid time, this is the only way this can be done,” a person close to the development said.

The lender recently completed its merger exercise with Vijaya Bank and Dena Bank.

According to another CEO of a consultancy, the lender had reached out to some of the top firms in this regard. “We were told that this is a priority and that they are willing to select the firm for the project by mid-June and hope to finish the project within next few months.”

As the end of December 2019, the bank had gross domestic advances at Rs 5.84 lakh crore within which retail contributed Rs 1.19 lakh crore, agriculture advances were nearly Rs 84,548 crore while MSME loans were at Rs 87,041 crore.

[Source – Economic Times]


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