It’s mind-boggling to realise the potential of the SME sector to revive the fortunes of banking and financial services organisations in India. Yet, the segment remains massively credit starved and under-served because of cumbersome and paper-heavy legacy processes.

Small and medium sized enterprises form the lifeblood of the Indian economy. Consider these numbers: More than 43 million SMEs in India make up 40% of the country’s GDP.

SMEs’s typical loan needs include working capital requirements, operational funding and cash for purchase of raw materials, among others. According to a survey by Deloitte, two thirds of loan demand for SMEs with revenues up to Rs 5 crore is unmet.

So what explains banks and financial institutions’ constrained appetite for this particular segment? Many would argue the time consuming, operationally expensive and complex risk assessment processes and requirements remain the main hurdles for banks. For borrowers, reams of paperwork and gruelling wait times are a dreadful prospect.

Many SME companies, as a result, are denied credit because of either lack of collateral or poor financial history or smaller loan sizes that don’t justify the risk-return metrics for the banks. Many financial institutions also struggle with making accurate assessments of customer’s credit worthiness because of these traditional processes, resulting in loss of millions of rupees in potential business opportunity.

However, technology holds the promise – and in many cases has already – revolutionised many crucial aspects of SME lending. Karur Vysya Bank, for instance, has recently forayed into digital processing cutting down processing time to 15 minutes.

Digital backbone

Many Indian banks have already either begun their core technology upgrade journey or completed it, which gives them the requisite infrastructure for digital innovation.

To put it simply, digitalising the lending process can significantly increase efficiency, ultimately helping financial institutions in the acquisition of new customers at a much lower cost. According to McKinsey, digital lending has been able to cut the time to lend from several weeks to as little as five minutes for many banks who have embraced going digital.

However, digitalising has its own set of challenges but they dwarf in size when compared to the competitive threats that banks face today. For example, while legacy technology in some cases can lead to frustration, digital calls for different functions of the bank need to work in tandem, which has traditionally been a challenge for many financial institutions.

Technology partnership is key

This is where many financial institutions around the world have brought on technology partners to help them roll out digital offering quickly. Automating important SME credit decisions through novel sources of data and integration with existing processes can significantly cut lending times.

For example, Decimal Technologies’ platform helps banks conduct digital profile checks and automate approvals, reducing turnaround time and the chances of error. This not only helps them with several compliance requirements but also majorly enhances the customer experience, which has become imperative for institutions to survive in today’s competitive and disruptive environment.

Additionally, advanced business analytics and machine learning capabilities also helps financial institutions customise their approach for specific customers, integrating with necessary third party systems and credit assessment agencies, improving the risk management process.


While many banks may be drawn to improving credit processes piece by piece, Mckinsey warns such a strategy has led to disappointing results for many banks and a loss of customer focus. It is crucial, therefore, banks take an end-to-end view of digitalisation without compromising on any aspect of customer experience.

Additionally, a long-term view is also critical. A scalable platform that can demonstrate reduced onboarding costs can help achieve that.

To learn more about how Decimal Technologies’ end-to-end offering for digital lending can helps banks revolutionise their processes, write to

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