Cash-flow-based lending will be increasingly used by banks to finance new-age industries like data centres, solar manufacturing and technology-driven businesses, State Bank of India Managing Director Ashwini Kumar Tewari said.

Since emerging businesses may not have the tangible collateral required for finance, banks need to develop new lending models.

Lenders must move beyond tangible security and find new ways to fund such emerging businesses, including pharmaceuticals and technology, Tewari said at a financial market conclave hosted by BCC&I.

Tewari said SBI is already using cash-flow-based lending models for emerging sectors, through an initiative called CHAKRA. He cited data centres, static conductors and solar manufacturing chain as sectors where adopting this lending model was necessary.

Banks will have to understand the technology, revenue potential, economics and cash-flow generation of new-age businesses before extending finance, he added.

Getting into details in the solar sector, SBI found that there is “a lot of technology” which is outdated.

Different technologies have different power-generation economics and banks would find it difficult to fund such projects unless they understand these technical aspects, Tewari said.

“There is still a difficulty in establishing the revenue, the economics and the cash flow generation,” he added.