Small businesses which were hit the hardest during demonestisation are bouncing back smartly, at least if their demand for credit is anything to go by. Bankers say that unsecured business loans portfolio, which is a lifeline for these small business entities, is showing a 15-18% growth over the past three months.

“After demonetisation, there was a slump in this section of business, but credit demand for unsecured small-ticket business loans has been steadily growing to around 15% to 18% now,” said Shanti Ekambaram, President (Consumer Banking), Kotak Mahindra Bank.

Before the note ban in November last year, there was a steady growth in loan demand, which clocked almost 20%, she said.

The government’s push to weed out cash from the system and replace it with plastic money had hit this segment the hardest as they mostly dealt with cash. Now with cash creeping back into the system and increased level of digitisation in their businesses, things seem to be falling back into place.

“They use it largely for their working capital needs, unsecured loans are typically shorter tenure loans and are ammortised. So the players use the funding in keeping with their business cycle,” said Ekambaram.

While banks do their own due diligence and also use their own decision-making engines to lend to this segment of the population, there are a lot of technology platforms emerging which are trying to enter this space by facilitating the SME segment to access easier loans.

“We are seeing a rapid pick-up in the segment for unsecured small value business loans for companies which report an annual turnover of about Rs 30 to 35 crore,” said Rohit Lohia, Chief Operating Officer, Cointribe, which is an online platform helping small and medium enterprises to access quick business loans from banks or NBFCs.

While the government is pitching for more digitisation, bankers say that if their entire gamut of payments for the SME sector flow through the formal banking channel, it will be easier for them to lend to these entities.

“There are multiple players with in the ecosystem and they all need to start making and accepting digital payments. I think the entire ecosystem has become used to dealing in cash, the whole chain has to change and that will take some time,” said Ekambaram.

Bankers say that while digital transactions showed a huge jump during the last few months of 2016, the numbers are settling down this year with more cash flowing back into the system.

“We are still lending to business entities on the basis of their financial position as well as non-financial position which includes the owner’s profile, his net worth, business and others,” said Ekambaram. “With more of their transactions happening digitally, we can move over to lending on the basis of transactions.”

Source: Times of India