Page 42 - BANKING FINANCE JULY 2016
P. 42
ARTICLE
Digitization:
Digitization is another area which is being pursued relent-
lessly by the Government . There is massive focus on en-
hancing internet penetration in the country through accel-
erated broadband connectivity. There lies inherent oppor-
tunities for the banking sector and better utilize this me-
dium as a delivery channel. Growing mobile and internet
penetration has opened new avenues for the entrepre-
neurs. The costs of banking transactions can also be dra-
matically reduced due to the advent of technology.
Credit Gaps to be bridged: supply chain financing solutions and small ticket funding to
the channel partners of large corporates.
Despite the increase in financing to the MSME sector ,
there is still a considerable credit gap which needs to be Would large corporate houses continue
bridged. In terms of the Report of the Private Sector In- to borrow from banks?
vestment for MSME Sub Group under Working Group for
the 12th Five Year Plan (2012 - 2017), the credit gap as a Of late, the global markets, particularly the emerging mar-
percentage to total demand is estimated at 48% in 2015- ket economies, have been flushed with funds flowing in on
16 for the MSME sector as may be seen from the table account of variants of QEs launched by the Central Banks
below: in the Advanced Economies. Many large corporate houses
have been able to access funds at very cheap rates with-
Estimated Outstanding Credit demand and out needing to reach out to banks. Further, the large cor-
supply of MSMEs porate in developed countries normally access financial
markets directly for their funding requirements rather than
Year Total Total Credit Gap Credit Gap commercial banks. Hence, as Indian economy and the fi-
Demand nancial markets mature, more and more large corporate
2010-11 Supply in absolute as % of houses could start by passing banks for their funding re-
2011-12 quirements.
2012-13 terms total
2013-14 Inspite of uncertain global environment, India is much bet-
2014-15 demand ter positioned now than before to seize what the Econo-
2015-16 mist calls " a rare opportunity to become world's most dy-
2016-17 2092500 737161 1355339 65 namic big economy."
2308384 874482 1433902 62 Mr. R. Gandhi, Deputy Governor, RBI in his speech has
categorically stressed on the hard relook by banks on their
2541574 1038948 1502626 59 portfolios viz., agriculture, industries, services, retail and
other services and to rebalance from the perspective of
2803628 1237539 1566089 56 diversification. As India is poised for re-entering high
growth period, and as greater number of individuals will
3089863 1477928 1611935 52
3405845 1769659 1636186 48
3757755 2124644 1633111 43
In the absence of alternate source of funding for the sec-
tor, the role of banks is very crucial in bridging this funding
gap. Small businesses are more dependent on bank capital
to fund their growth. Bank credit act as a 'financial accel-
erator'. In this context, the banks to look beyond their ex-
isting customer base and the large corporate and to reach
out to the vast number of micro and small enterprises which
are presently deprived of bank credit by planning product
delivery and building lasting customer relationships which
will translate into higher revenues. This will also lead to
42 | 2016 | JULY | BANKING FINANCE
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