COVID 19 Effect: Banks to go fully digital
By MYBRANDBOOK
COVID-19, the global pandemic is forecast to shrink the global economy by as much as 6% in 2020. Despite this, the current situation could present an opportunity for financial institutions to make the leap and go digital – even though banks are tightening their belts and putting tech investments on the back burner.
Though the Central government and the RBI have announced various measures to support MSMEs to come out of the crisis caused by the pandemic, there will be a significant increase in the demand for working capital and business loans as the impact of the crisis on some sectors will last beyond three months.
Unsecured lending is not going to be the same after the lockdown since business stability itself will be circumspect. Commercial banks with better liquidity are expected to lend more to MSMEs, while other established financial institutions with a deep understanding of MSME lifecycles are also expected to help them stay in business.
But alternative funding platforms and emerging lending institutions can fill a vast gap in small business segments.
“The biggest challenge for small- and medium-sized companies is the cash flow, and each company needs a fresh infusion of working capital to restart the operations,” says Prabhu Dhamodharan, Convenor of Coimbatore-based Indian Texpreneurs Federation.
Armed with technology, many emerging players indicate that they are well-placed to serve the needs of small businesses in the days to come.
Dhamodharan points out that alternative funding platforms need to understand a sector’s model of working and design products suitably to the exact needs of the sector. Even within the textile segments, spinning and apparel have different needs.
“They need to design sector- and cluster-specific products. Federations like ours have already started engagements with some non-traditional platforms to explore the funding options,” he added.
Meanwhile, the lending institutions also hope that regulatory intervention would happen, primarily in easing the norms for NPA recognition and stage 1 and stage 2 accounts. Incentivising and supporting institutions focussed on lending to the MSME sector would go a long way in reviving the sector.
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