SBI shifts focus to cash-flow lending for emerging industries

Banks must develop new lending frameworks to support emerging industries that lack traditional collateral, according to Ashwini Kumar Tewari, Managing Director of State Bank of India. Speaking at a financial market conclave organised by BCC&I, Tewari highlighted the critical role of cash-flow-based lending in financing sectors including pharmaceutical, technology, data centres, and renewable energy.

"Unless banks find ways to fund new businesses—whether in pharma, technology, or other emerging sectors—they need to move beyond traditional collateral-based security models," Tewari said. The challenge for financial institutions is to devise credit frameworks suited to businesses that may not possess tangible assets traditionally required for bank financing.

SBI is already implementing cash-flow-based lending mechanisms to address this gap. The bank has developed a proprietary model called CHAKRA, which Tewari described as "a very significant tool because it is very emergent in the world." The initiative demonstrates SBI's commitment to supporting high-growth sectors that are reshaping India's economic landscape.

The shift towards cash-flow-based assessment reflects broader changes in the banking sector's approach to risk evaluation. Rather than relying solely on collateral, banks are increasingly examining business cash flows, market potential, and growth trajectories to make credit decisions. This approach is expected to become more prevalent as technology-driven and capital-intensive industries continue to expand.