About 18 months ago, post consultation with McKinsey, SCUF rolled out a standardized pattern of MSME loan sourcing across geographies. However, the management is waiting for one full cycle to complete (three years) before altering any credit cost guidance. In addition, this new model is expected to help scale up the MSME loan book in non-South geographies. Currently, To prevent customer migration to competition after a loan cycle, the management has decided to reduce the interest rate for existing MSME borrowers by 200bp in the subsequent cycle. However, existing borrowers come with nearly nil incremental sourcing cost as well as lower probability of defaults. Sourcing activity generally happens from the 1 of the month. Incentives are paid to executives only if they disburse at least three loans per month. Branch managers can deviate from the output of the new sourcing model (the McKinsey model) provided they get an approval from their seniors.