Mumbai: The RBI deputy governor has said that in view of the competition from fintech companies, banks should reorient their business model and look at collaborating with more efficient players after assessing the likely impact of disruption.
Delivering the inaugural address at a seminar organised by College of Agricultural Banking in Mumbai, RBI Deputy Governor SS Mundra said, “Fintech companies have leveraged on growing technological advances and pervasiveness of smartphones and have targeted niches to bridge the funding gap for small businesses with innovative and flexible credit products.”
He added that fintech lending companies and the marketplace based lending companies have an underlying potential to emerge as an alternative source of finance for the small businesses. “Considering the need to strike a balance between regulation of these entities even while preserving their ability to innovate, the RBI is currently consulting on approach to regulate the P2P lending,” said Mundra.
Mundra said that potentially, the Ministry of Micro, Small and Medium Enterprises (MSMEs) borrowers can apply online in minutes, select desired repayment terms and receive funds in their bank accounts within 2-3 days with minimal hassle. “There are few documentation requirements, very quick turnaround time and flexible loan sizes and tenors. That the P2P lenders can become a significant source of finance for the small borrowers is evident from the UK example where the P2P lending represents about 14% of the new lending to the SMEs,” said Mundra.
The deputy governor said that SME lending, being a hugely underserved market, is a major opportunity for fintech startups to build and scale up sustainable businesses by offering services such as credit underwriting, and marketplace lending.
With around 51 million units throughout the geographical expanse of the country, MSMEs contribute around 8% of GDP, 40% of the total exports and around 45% of the manufacturing output. There are several Fintech companies in the MSME financing space which have been growing rapidly. Fintech companies are improving access to finance for SMEs by giving loans themselves or by connecting SMEs to banks and financial institutions or by becoming financial aggregators.
Source: Times of India
