FICCI-IBA calls for credit history database
Banks in India have been asked to collaborate with Fintech companies, using digital platform effectively to popularize the government’s various schemes to support Micro, Small and Medium Enterprises (MSMEs).
This call has come from a survey conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI) and Indian Banks’ Association (IBA) where respondents suggested to close the financing gap for MSMEs. The survey findings were released on 13 Aug 2018.
Respondents also shared their views on potential collaboration of the banking sector with fintech companies for MSMEs support.
The suggestions included setting up of credit history database for MSMEs to address the issue of information asymmetry that restricts lending to MSMEs.
Respondents said that with innovative technologies and business models, fintech platforms enjoy a competitive edge due to cost-effective operations and fewer regulations than the traditional finance sector, citing that fintech can have a significant role to play in MSME financing.
The tie-up between Banking and Fintech can benefit lenders with additional data, whereby they can enhance market penetration as well as receive early warning signals with respect to any portfolio deterioration.
The Jan-Jun 2018 survey covered 22 public sector, private sector and foreign banks, representing 64% of the banking industry, as classified by asset size.
The survey has been conducted at a time when Non-Performing Assets (NPAs) have shot over Rs.10 trillion and continue to rise.
The Insolvency and Bankruptcy Code (IBC) has shown success with resolution of stressed assets even as the law continues to evolve.
The current round of FICCI-IBA Bankers’ survey also covers respondents’ views on recent amendments to the IBC, Central Bank Digital Currency and MSME financing.
The survey findings reveal stark difference in the banking sector performance as compared to July – Dec 2017 period on the parameters studied.
Similar to the previous round of the survey, 59% of the respondent banks reported a rise in Non-Performing Assets (NAs) in the current round of the survey.
Infrastructure, metals and engineering goods were the key sectors reported with the highest NPAs. More than two-thirds of the respondents have cited these as sectors with high NPAs. Other major sectors with high NPAs are Engineering Goods, Textiles, Food Processing and Gems and Jewellery. fiinews.com
