Thank you for your elaborate introduction, which is not needed.
LUB office bearers, this is the first time I got associated with LUB, in the sense... [clears throat] so, first time, particularly, I'm very, very impressed. So I think I chose the right forum to share some of the things what a banker does, like particularly State Bank of India does.
But before that, I think I want to acknowledge the wonderful context setting done by Mr. Bangatum, talking about the role being played by MSMEs. He talked about the rich contribution to exports, rich contribution to employment, etc. And of course, the objective is not to be satisfied with where we are, but it is to tread ahead, particularly move ahead in terms of our goal to become Viksit. So I would like to dwell on a couple of topics, particularly the productivity part, and Hyderabad being a hub of startups, how MSMEs and startups can collaborate in terms of increasing their productivity, particularly the technology adoption, etc. And then, of course, as a banker, how State Bank of India is helping.
No, it is a lighter note. There is nothing like a settling course. So, Hyderabad... Hyderabad... GCC... large technology companies, traditional industries like pharmaceuticals, life sciences. So, next... Hyderabad-based company called Skyroot Aerospace.
So just to talk about Skyroot, we have seen only a few months ago that Skyroot Aerospace, founded here in Hyderabad, created history when the rocket they developed, Vikram-S, became the first privately developed Indian rocket — sorry, it's an Indian rocket — to successfully reach space from Indian soil. All along it has been the prerogative of the public sector, but this is a private sector company which has actually helped in terms of the first rocket to be launched to reach space.
But what is more important is this was the work there. There were 300-plus MSMEs behind this venture in terms of providing them whatever components they require, whatever tools they require. So actually what we are talking about is one anchor company called Skyroot has actually given birth to so many other MSMEs — 300-plus MSMEs. That is the potential of an ecosystem. So what we are saying is this is a powerful picture of the enterprise India that we must build on the lines of Skyroot and the other MSME system.
So a startup, if I have to say, like what is the role of a startup, it begins with innovation, but as it succeeds, it can itself become an anchor around which MSMEs develop new capabilities. A sunrise sector can create an entirely new value chain. Technologies move from the frontier into the wider economy. Suppliers become more sophisticated, new commercial relationships emerge, and what began as an entrepreneurial idea gradually becomes an ecosystem. Right?
So for India to become a developed economy, enormous additional investment will be needed. I think capital... we require huge investment in infrastructure, technology, skills and productive capacity. Equally important will be how effectively we use the capital, talent, technology, energy and entrepreneurial capability already available across our economy. So development is not only about adding resources, it is also about continuously increasing the value those resources are capable of producing.
So in fact, there is one study by McKinsey, their Global Institute conducted a study where they are able to find there is a significant productivity gap between MSMEs' productivity versus some of the large companies. Particularly when we want to become Viksit and when we want our economy to multiply, I think we need to cover that gap as well — the productivity gap — and this has the potential to increase the GDP by 10% as per their estimates.
So I will say the three stages: innovation creates possibility, diffusion creates reach, and absorption creates productivity. So what I mean is this: absorption means when technology begins to change the processes, people, data, decisions and management practices. So technology creates productivity only when it changes the way the work is done. Right?
So I also saw some initiatives from LUB in terms of technology, particularly AI. I don't think with the minister for IT being here, not talking about AI will not be proper. So I will just cover a couple of lines around AI, how it can help the MSMEs. So artificial intelligence makes this moment particularly significant.
For decades, large companies enjoyed an inherent advantage because they could offer sophisticated analytics, market research, specialized expertise, etc. But for the first time, a small enterprise may not need to become a large one to have access to all these things. So AI is actually bridging the gap. So this is why Bharat must shorten the distance between invention and widespread productive use.
Startups can become productivity partners of MSMEs, while MSMEs can become one of the world's largest environments for the commercial applications of innovation. A young company may have an excellent technology, but it still needs a customer willing to test it against a genuine business problem. So supporting the startups, therefore, is not only about funding the innovation, it is also about creating serious pathways for its adoption.
So my second theme will be this productivity and finance flywheel, what we call a catalyst. Adoption converts innovation into transactions. Transactions create evidence, and evidence creates financial visibility, and financial visibility can progressively create fundability. Fundability means your access to bank loans, or otherwise your access to growth capital which is given by private equity and other venture capital firms.
So for the MSME, technology adoption can improve bankability; for the startup, MSME adoption can improve its fundability. So banking is therefore also evolving from a world dominated by collateral-based confidence, which I think that example also talks about. We are now moving towards cash flow-based lending. So collateral, financial statements, promoter strength — they will continue to be relevant and remain important, but no viable enterprise will be denied finance only because there is no collateral.
20 years back, perhaps a banker's outlook... up to 10 crores without collateral, any viable startup or any viable entity can be financed up to 10 crores. Thanks to the initiatives of the central government as well as the state governments, which is helping us, particularly with the backdrop of the CGTMSE guarantee, we are able to fund up to 10 crores.
And another thing, this cash flow-based financing is no longer a theory. I will quote one example in SBI, State Bank of India: consuming the digital footprint — that means the UPI kind of data being used by the MSME for their purchases or their sales, or their account statements, etc., and their GST statements — we are able to underwrite 1 trillion, that means 1 lakh crore worth of MSME loans, we have underwritten without insisting on a financial statement.
So this is, I think, some of you would have made rounds and rounds around the banks in terms of submitting various financial statements, but now the current era is we have moved out of this dependency on financial statements. Up to a particular amount, say 5 crore, we are not insisting too much on audited financial statements. As long as you are present digitally, as long as you are there on the GST network, it becomes so easy for us to hand over a sanction letter in about just one hour, and maybe two to three days for completing the rest of the formalities, as compared to a minimum of one month what it used to take in the past.
So I think thanks to the policy enablements and of course the advocacy of organizations like LUB, there are a lot of changes. My third point, perhaps, is sunrise sectors, what SBI is doing. So sunrise sectors offer a different route to enterprise growth. In an established industry, an MSME generally enters a value chain whose broad structure is already visible. In a sunrise industry, the value chain itself is still being formed.
So new technologies are emerging, standards are evolving, localization opportunities are opening, and some of tomorrow's major anchors may themselves still be the startups today. So the strategic question for an MSME therefore becomes: where in this emerging value chain can I build a capability that will become important tomorrow?
At SBI, we have taken one initiative particularly for the emerging sectors. We are talking about semiconductors, battery storage, energy, EV manufacturing, etc. For these sectors, we have taken an initiative called — we have set up a center of excellence called Project Chakra. It is called the Chakra initiative. So where we are doing a lot of research in terms of what technology is appropriate for these sectors and what is a banking model through which we can finance not only the large companies which are setting up these units, but the entire smaller MSME universe which will be supplying various components, etc., to these major ones. We have created a banking model. We are taking increased exposure to these sunrise sectors.
So this brings me directly to SBI's role in supporting startups and strengthening MSMEs. We increasingly believe that our role is to bank the enterprise across its life cycle, not appear only when it asks for a loan. So the relationship may begin with accounts, payments, collections and cash management as the enterprise evolves, but it extends into working capital, term finance, machinery finance, guarantees, etc. We are also a very active player on TReDS. Some of your invoices may have been discounted by us on the TReDS platform, and you would have seen the speed at which the cash flow comes back to you when you are supplying to larger units.
In my last few minutes, I will just focus on how we are ensuring the entire ecosystem builds up. We work with large corporates and anchors at one end, and MSMEs and startups at the other end, with vendors, dealers, receivables, payments and supply chains running through the middle.
Our branches — there are around 800 MSME-intensive branches where there is trained manpower in terms of guiding future entrepreneurs as to how they go about setting up the units, how they can avail the finance, etc. And we also have more than 2,000 trained RMs, what we call, who are a very trained resource. They serve as a single point of contact.
Our branches and relationship managers provide reach and human understanding. Digital systems provide information and speed. Our corporate relationships provide visibility into commercial ecosystems, and initiatives such as our SBI Chakra and the MSME Center of Excellence, etc., they deepen the sector understanding.
So I'm just closing in a couple of minutes. I began with the Skyroot story because it captures something important about the India we are trying to build. The achievement is visible in the rocket, but the deeper economic value lies in the capabilities created across the enterprises that helped make these achievements possible. That is also the essence of what we mean by Scale Up Bharat: creating an economy in which a promising enterprise can continuously acquire capability, enter stronger markets, and grow beyond the limits of its present size.
Laghu Udyog Ratna expresses this aspiration simply: Udyog aur Rashtra. So when enterprise becomes stronger, the nation becomes stronger. When Indian enterprises acquire the capability to compete with the best, that is the reality. So at State Bank of India, we consider it a privilege to cater to this entire journey. Thank you. Thank you all.
