Month: July 2021

SBI Introduces This Functionality For Ultimate Banking Safety: Check How You Can Use It

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In order to make online banking highly safe, the country’s top lender State Bank of India is constantly upgrading its features as well as technology. In its latest attempt, SBI via its official twitter handle State Bank of India @ The Official SBI said “Now online banking is more secure than ever with SBI! Download the latest Yono Lite app now:mobilityretail.sbi/sbf_retail.html #YONOLite #YONO #OnlineBanking #SafeBanking #BeSafe

SBI Unveils This Functionality For Ultimate Banking Safety: Check How You To Use

SBI Introduces This Functionality For Ultimate Banking Safety: Check How You Can Use It

As part of the latest upgrade, the bank has introduced SIM binding for Yono Lite and here as a giant leap towards banking safety.

The bank has come up SBI binding functionality- Here is everything you need to know about SIM binding functionality:

What is SIM binding feature introduced by SBI?

This will be a new feature whereby only one user or individual per device from the registered mobile number will be able to access SBI digital banking. Now the bank has asked its SBI customers to download or update the Yono Lite app edition 5.3.48 and complete a one-time registration process using the registered mobile number.

Registration on SBI Yono lite app

Yono Lite app of SBI offers retail digital banking and offers an easy and convenient way to access SBI’s various digital services.

1. Download or update SBI Yono Lite on your mobile

2. Need to select the SIM if it is a dual SIM phone, else no SIM selection is required for the registration process to complete.

3. In the third step, the message will flash on your mobile asking to send an SMS fro your phone to validate the mobile number.

4. Now you need to choose the ‘proceed’ button and an SMS comprising an unique code will be sent from this device to a pre-defined number.

5. Herein you will be taken to the registration window and now you need to enter User Name and Password and click the REGISTER button. Accept the terms and conditions for registration by choosing the check box and click the ‘OK’ tab. Then on an activation code will be received on the registered mobile number. This activation code will be valid for 30 minutes. For completing the activation, one needs to put in the activation code in the app.

Likewise iOS users need to follow the instructions to register on the SBI Yono Lite app. Also, note that for accessing the SBI Yono app you need to ensure that you have registered with State Bank of India.

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Fast growing gold loans turn sour hit by lockdowns, BFSI News, ET BFSI

Banking & Finance

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High yielding advances against gold jewellery, once the hottest loan product for banks, have turned sour this year as collections are affected due to the lockdown in the first quarter. Kerala-based Federal Bank and CSB Bank, besides large private sector lenders such as ICICI Bank, have seen slippages increase from this portfolio.

Although lenders say the pain is transitory, the second quarter is crucial for this portfolio to not become a big source of NPAs.

Banks for which gold loans contribute substantial amount to their profits, were hit in the first quarter. Out of the Rs 640 crore slippages that Federal Bank saw during the quarter, Rs 86 crore was from gold loans or linked to the product as a result, the bank’s gross NPAs rose to 3.50% of advances, up from 2.96% a year.

Similarly, Federal Bank’s smaller peer CSB Bank’s gross NPAs rose to 4.88% in June 2021 from 3.51% a year earlier due to the rise in NPAs from the gold loan business. Out of the Rs 435 crore of new NPAs during the quarter, Rs 361 crore was from gold loans including reversal of interest for the bank where gold loan makes up 38% of its assets.

Gold loans were the pain point even for larger lenders like ICICI which reported fresh slippages of Rs 6773 crore from its retail book out of which Rs 1123 crore were from such loans.

Analysts said the rise in delinquencies reflects the challenges banks faced in loan collections and also the cash flows issues faced by gold loan borrowers most of whom are micro entrepreneurs.

“There is also the impact of the fall in gold prices since last year which has made lending a little more risky. The fall in gold prices means that the strong growth that we saw in this portfolio last fiscal may slow down this year as banks will be more cautious,” said Prakash Agarwal, head financial institutions at India Ratings & Research.

Gold prices have fallen from a peak of Rs 52,827 per 10 grams in August 2020 to Rs 47,640 per grams now, though it is higher than the Rs 44,739 per 10 grams reported in March 2021. The rise in gold prices had also prompted the Reserve Bank of India to increase the loan to value ratio (LTV) to 90% from 75% in August. The LTV has since been restored to 75% from April.

Bankers however said despite the recent hiccups gold loans continue to be a well performing portfolio which can be built over the long term.

“We still believe in this portfolio and will continue to build it. There is no need for any caution. We are confident that as things improve both demand for loans and recovery of will improve. Already we are seeing an increase in recovery and we continue to expect growth in this fiscal year,” said CVR Rajendran, CEO at CSB Bank.

The growth though is going to be slower than the 61% growth the bank recorded in the fiscal ended March 2021. The banking system itself had recorded a 82% growth in fiscal 2021.

Bankers said the high yields and low risk offered by gold loans make it a winning product. CSB Bank for got a 11.50% quarterly yield in March 2021.

“In good times or bad gold loans are always a good product to have. Out NPAs in the segment is 0.20% which is very low with average loan to value (LTV) of about 80%. The loans at LTV of 93% are in single digits; so it is a very small portion,” said Shyam Srinivasan, CEO at Federal Bank.



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RBI’s communication key to handling excess liquidity, says StanChart’s Sahay, BFSI News, ET BFSI

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NEW DELHI: Over the last few weeks, a conundrum has resurfaced for the Reserve Bank of India — how to keep the liquidity surplus in the banking system from ballooning past a point that would be difficult to tackle in the future.

Standard Chartered Bank‘s head of economic research – South Asia, Anubhuti Sahay, is of the view that while it is important to permit a surplus of liquidity, it is equally important that “unnecessary excesses” are mopped off.

“I would suggest the following to the RBI Governor. The stock of liquidity if it becomes too large can become very difficult to absorb later on. Thus it is important that timely action is taken to ensure that liquidity remains in surplus, allows monetary policy transmission but unnecessary excesses are mopped off,” she said.

At present, liquidity in the banking system is estimated to be around 6 lakh crore rupees while the government is expected to be sitting on around 4 lakh crores, taking the core liquidity above 10 lakh crores.

Liquidity in the banking system in seen rising in the Jul-Sep quarter because of redemptions of Treasury Bills worth around 1.7 lakh crores, treasury officials said. In addition, the RBI is regularly infusing durable liquidity through its bond purchases under the recently announced ‘Government Securities Acqusition Programme’.

For the current quarter, the central bank has committed bond purchases worth 1.2 lakh crores.

From the perspective of its bond purchases there is little that the RBI can do because it is necessary for the central bank to be an active buyer of gilts and anchor sovereign borrowing costs at a time when the government borrowing programme is huge.

Moreover, the surplus liquidity conditions maintained by the RBI have had a significant role to play when it comes to keeping credit costs in the economy low at a time when the coronavirus crisis has crippled demand.

Sahay said that the RBI’s communication to markets would play a key factor in how the central bank manages episodes of a large accretion to liquidity.

In January 2021, markets were spooked when the RBI unexpectedly announced variable rate reverse repo operations as the step was taken as a precursor to policy normalisation.

At the time, the liquidity surplus was comparable to what it is now. The RBI has since, several times assured markets that it is not taking any steps to commence policy normalisation.

“It is important that measures are announced on a regular frequency while clarifying that these are not measures towards policy normalisation,” Sahay said.



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Number of unique wilful defaulters rose by 286 in pandemic, BFSI News, ET BFSI

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The number of wilful defaulters has increased from 2,208 to 2,494 at the end of March 31, 2021, Finance Minister Nirmala Sitharaman informed Parliament on Tuesday.

As per RBI data on global operations, during the last three financial years, public sector banks (PSBs) have effected recovery of Rs 3,12,987 crore in non-performing assets (NPAs) and written-off loans.

“RBI has further apprised that the total number of unique wilful defaulters reported by PSBs was 2,017 as on March 31, 2019, 2,208 as on March 31, 2020 and 2,494 as on March 31, 2021,” she said.

Bank NPAs

Sitharaman said that the RBI has apprised that as per data reported by banks to the Central Repository of Information on Large Credits (CRILC), the total funded amount outstanding of borrowers whose sector code is private and whose loans are classified as NPAs in the PSBs as on March 31, 2019, March 31, 2020, and March 31, 2021, is Rs 5,73,202 crore, Rs 4,92,632 crore and Rs 4,02,015 crore respectively.

Banks are required to take steps to initiate the legal process, wherever warranted, against the borrowers or guarantors for recovery dues, she said. They may also initiate criminal proceedings against wilful defaulters, wherever necessary, she added. In reply to another question, the Finance Minister said public sector banks have done a write-off of Rs 1,31,894 crore during 2020-21 as compared to Rs 1,75,876 crore in the previous year. As a result of the government’s strategy of recognition, resolution, recapitalisation and reforms have led to decline in gross NPAs as a percentage of total advances to 9.11 per cent as of March 31, 2021, from 11.97 per cent on March 31, 2015.

Top 100 wilful defaulters

The total size of the top 100 wilful defaults rose 5.34% in FY20 from Rs 80,344 crore as of March 2019.
Mehul Choksi-owned Gitanjali Gems topped the wilful defaulters’ list with Rs 5,693 crore dues, followed by Jhunjhunwala brothers’ REI Agro with Rs 4,403 crore and Jatin Mehta’s Winsome Diamonds & Jewellery with Rs 3,375 crore.

The top 10 wilful defaulters include another jewellery maker Forever Precious Jewellery, and Vijay Mallya’s Kingfisher Airlines Punjab National Bank had the highest exposure to Gitanjali Gems with Rs 4,644 crore of non-performing assets (NPA) as of March 2020. PNB also had Rs 1,447 crore exposure to Gili India and Rs 1,109 crore to Nakshatra Brands.

Write-offs

State Bank of India had Rs 1,875 crore dues from top 10 wilful defaulter ABG Shipyard with the bank writing o the entire amount. Uco Bank had Rs 1,970 crore exposure to REI Agro with half of it being written off.

Write-offs are accounting entries for shifting NPAs from the active balance sheet to off-balance sheet accounts. These are backed by 100% provision and therefore any recovery from these accounts adds to net profit.
RBI collects credit data from banks monthly, with data on defaults being collected on a weekly basis. The regulator has mandated banks to provide fully against NPAs older than four years and allowed to write these old NPAs.

The reduction in NPAs during FY20 was largely driven by write-os, RBI had said in its report on Trend & Progress of Banking in India. Banks’ total gross NPA reduced to 8.2% at the end of March 2020 from 9.1% a year earlier.



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Personal Finance Changes To Come Into Effect From August 2021

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1. NACH will enable you to get salary and other credits even on banking holidays:

National Automated Clearing House will now be available 24*7 irrespective of the bank holiday or weekend and hence people will be able to get their salary, pension as well as other debits in relation to various investments can be made even on bank holiday. In the current regime, NACH is only available on the bank working days.

2. ATM transactions to become expensive:

2. ATM transactions to become expensive:

The banks as per the recent ruling of the Reserve Bank of India may increase the interchange charge at ATMs by as much as Rs. 2. The interbank charge can be increased from Rs. 15 to Rs. 17 in respect of financial transactions as well as to Rs. 6 from Rs. 5 for non-financial transactions. This interbank fee is charged by banks to merchants that process payments using the debit or credit card.

3. Free ATM transactions capped:

3. Free ATM transactions capped:

From one’s own bank’s ATM, the number of free ATM transactions have been capped at 5. At other bank’s ATM, the number of free ATM transactions vary depending on the city, in case of a metro city the free transactions allowed using other bank’s ATM is 3 and that at a non-metro city is decided at 5.

4. Loan and fixed deposit rates may see a change:

4. Loan and fixed deposit rates may see a change:

As growth is on the radar of the RBI and the centre, it is unlikely that the interest rates shall be tinkered with in the upcoming monetary policy scheduled from August 4-August 7, nonetheless nothing can be said with certainty till we get to hear the policy statement by the RBI’s Governor.

5. ICICI Bank's new rules on ATM transactions as well as chequebook:

5. ICICI Bank’s new rules on ATM transactions as well as chequebook:

For up to 4 transactions, ICICI Bank charges no fee and post this on each of the transaction there shall be levied a fee of Rs. 150 after the free limit is exhausted. In a year, one can avail ICICI Bank’s cheque book with 25 leaflets for free but thereafter for every cheque book with 10 leafs there shall be a charge of Rs. 20.

6. LPG prices may be revised:

6. LPG prices may be revised:

LPG prices are revised on a month on month basis and it is likely that LPG cooking gas rates may trend higher in the new month.

7. Form 15CA/15CB filing deadline extended:

7. Form 15CA/15CB filing deadline extended:

Amid the coronavirus pandemic, the CBDT has allowed relief to taxpayers and extended the deadline for filing form 15CA/15CB, the deadline of which is ending on August 15. Form 15CA/Form 15CB are the IT department mandated filing requirement for any foreign remittances made.

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FinMin offers citizens prize money to come up with name, logo for new infra fund body

Banking & Finance

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The Finance Ministry, in association with mygovIndia, has launched a crowdsourcing initiative to coin a name, suggest a tagline and design a logo for a newly created development financial institution (DFI).

“Name, tagline and logo should represent the intent behind setting up of the DFI and be a clear marker of what it will/can do. It should in effect be like a visual signature, easy to recall and pronounce. Each of the three elements would stand out on its own but would represent, a synergized approach,” reads the government statement on www.mygov.in.

Each category will have three prizes of ₹5 lakh, ₹3 lakh and ₹2 lakh. Entries should be submitted by August 15. “Entries will be evaluated on creativity, vibrancy, ability to connect with the theme, citizens and all stakeholders, should reflect the spirit of New India as we celebrate Azadi Ka Amrut Mahotsava with India@75,” the notification said.

Need to rethink financing and development priorities for enabling sustainable infrastructure: FM

The government has decided to create the DFI exclusively to fund infrastructure such as the proposed ₹111-lakh-crore National Infrastructure Pipeline and more than 7,000 other projects, which require timely and large funding.

Government bets big on infrastructure

According to the notification, the DFI will be a development bank with credibility and a mandate through explicit Government support. It will crowd in, not elbow out, other lenders. It will not only provide credit and credit-plus services but, equally, be an enabler and catalyst for a new ecosystem for infra based on collaboration and partnership. It will prioritise risk mitigation, product innovation, accessing green and ethical funds, and helping develop a vibrant bond market.

It would have the size and ambition to make a difference as well as play a counter-cyclical role, whenever needed. It will lend long term, for achieving financial closure for big-ticket infra projects commensurate with a $5-trillion economy. “The design of the DFI itself is path breaking and bold, representing a decisive break from conventional thinking,” the notification said.

In a tweet, the Finance Ministry said that the setting up of a DFI was announced by Finance Minister Nirmala Sitharaman in Budget 2021-22. Both Houses of Parliament passed the National Bank for Financing Infrastructure and Development (NaBFID) Bill 2021 in March, which was later assented to by the President.

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Pencilton raises $330K in a pre-seed round by Jupiter, others, BFSI News, ET BFSI

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HYDERABAD: Pencilton, a teen-focused fintech company, has announced raising $330K in a pre-seed round led by Jupiter (registered as Amica Financial Technologies Pvt. Ltd). The round also saw participation from Nilesh Patel and Prashant Singh (Founders, LeadSquared), Ashish Sharma (MD, Innoven Capital), Abhishek Goyal (Founder of Tracxn), Himanshu Sharma (Founder, Aspiring Minds), Kunal Sinha (Founder, GlowRoad), Vignesh Ramanujam (Partner, Spoonfeed) and angel investor Tirumalareddy Karri.

Pencilton offers a debit card, PencilCard, to teenagers and students to help them manage their expenses while teaching them the basics of money management. An upgrade is expected to its debit card in a few weeks that works with the Pencilton app to enable financial inclusion and digital financial literacy for teenagers. With the new funding, the company aims at product enhancement by building industry-leading backend systems for card issuance, management, and further launching of upgraded products. The company was founded by Vishwajit Pureti, Ashish Singh, Pallavi Tipparaju, and Viraj Gadde in 2020.

In a statement, Vishwajit Pureti said, “This round is important as it serves as a vehicle for us to have some of the best minds from the fintech and startup ecosystem, join us on our mission. We are going to announce many industry-leading initiatives that will help bring the best of fintech tools and digital financial literacy to students across India.”

The company has recently introduced the PencilCard, a RuPay debit card for teens across India that can be activated and managed via the Pencilton app. Teens can use the debit card to manage, receive and spend their pocket money through the help of the app. In addition, parents can also use the app to give pocket money, setting parental controls such as the spend limits, approval of money requests, etc.

Pencilton chose the RuPay card platform as it is a product built in India and line with the Government’s ‘Make in India’ policy. It also allows Pencilton to work closely with NPCI to innovate on various aspects of the fintech ecosystem that will soon help bring some never-before-seen features of fintech, not just in India but the whole world, to the fingertips of the next generation.

“The teen/pre-teen banking segment is nascent and growing rapidly. We believe that the Pencilton team understands the space and is solving both kids’ and parents’ needs,” said Rahool Gadkari, Director of Product, Jupiter, in a statemet.

Pencilton aspires to educate the younger generation on financial literacy and management and become the most innovative and prominent player in this space.



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ESAF Small Finance Bank files Rs 998 crore IPO papers with Sebi, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: ESAF Small Finance Bank has filed preliminary papers with capital markets regulator Sebi to raise Rs 998 crore through an initial public offer (IPO).

The Rs 997.78-crore public issue comprises fresh issue of equity shares worth Rs 800 crore and an offer for sale of Rs 197.78 crore by existing selling shareholders, the draft red herring prospectus (DRHP) filed with Sebi showed.

Under the offer for sale, promoter will be selling shares worth Rs 150 crore, PNB MetLife would be offloading shares to the tune of Rs 21.33 crore, Bajaj Allianz Life will offer shares of Rs 17.46 crore, PI Ventures will sell Rs 8.73 crore worth shares and John Chakola will offer shares worth Rs 26 lakh.

The bank may consider a pre-IPO placement of equity shares for an aggregate amount up to Rs 300 crore. If the pre-IPO placement is undertaken, the amount raised from such placement will be reduced from the fresh issue.

Proceeds from the fresh issue will be used to augment the bank’s Tier – I capital base to meet future capital requirements.

ESAF Small Finance Bank is one of the leading small finance banks in India in terms of client base size, yield on advances, net interest margin, assets under management compound annual growth rate (CAGR), total deposit CAGR, loan portfolio concentration in rural and semi-urban areas and ratio of micro loan advances to gross advances.

As at May 31, 2021, the small finance bank had over 4.68 million customers in 21 states and two union territories.

Axis Capital, Edelweiss Financial Services, ICICI Securities and IIFL Securities have been appointed as merchant bankers to advise the bank on the IPO.

The equity shares of the bank will be listed on BSE and NSE.



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2 Stocks To Accumulate With Potential Upside To Outperform Market, Says KRChoksey

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2 Stocks To Accumulate With Potential Upside To Outperform Market, Says KRChoksey

CMP Target Potential Upside Recommendation Sector
Bajaj Auto Rs 3,836 4,352 13.4% ACCUMULATE Automobile
UltraTech Cement Rs7,490 8,128 8.5% ACCUMULATE Cement

UltraTech Cement

UltraTech Cement

Cement prices have been steady so far in July, owing to the rainfall, which will either keep prices stable or cause them to fall somewhat. In most of the regions, the situation has remained constant. The company witnessed a 6-8 percent increase in regional prices in Q1FY22. In Q1FY22, prices in the East/South were up 10%, the West was up roughly 7%-10%, and the North/Central was up 3-6%.

Ultratech Result Highlights of Q1FY22

  • Ultratech reported a 54.2 percent YoY increase in sales to INR 1,18,298 million, which was generally in line (0.7 percent below) with our forecast.
  • Higher utilisation, sustained demand, and a low base impact drove a 47 percent YoY increase in cement sales volume to 21.5 MT from 14.7 MT in Q1FY21.
  • Capacity utilisation in Q1FY22 was 73 percent, up from 46 percent in Q1FY21.
  • PAT increased by 114.4 percent YoY to INR 17,026 million, however it fell by 4.1 percent on a quarter-on-quarter basis.

KR Choksey expects the stock of UltraTech Cement to hit at least Rs 8,128 as against the current market price of Rs 7490.

UltraTech Cement

UltraTech Cement

“The stock price of Ultratech has rallied ~10% since our last update and is currently trading at FY22E/FY23E EV/EBITDA of 17.7/16.3x. We are optimistic about the company’s growth prospects and apply an EV/EBITDA multiple of 17.5x to FY23E EBITDA, which yields a target price of INR 8,128 per share (earlier INR 7,415 per share); a potential upside of 8.5% over the CMP. Accordingly, we reiterate an ACCUMULATE rating on the shares of UltraTech Cement Ltd,” the research report said.

We remain positive on Ultratech’s growth prospects given its robust financial performance and market leadership position. We expect Ultratech Cement to post a CAGR of 7.6%, 8.9%, and 16.6% in Revenue, EBITDA, and PAT respectively over FY21-23E on the back of a robust demand environment in the country, it added.

CMP: Rs 7,490

Target: Rs 8,128

Potential Upside 8.5%

Market Cap (INR Mn): INR 2,161,687

Recommendation: ACCUMULATE

Sector: Cement.

Bajaj Auto

Bajaj Auto

Bajaj Auto‘s main focus will be on gaining market share, and the company is optimistic about the demand outlook in the international market. Due to the present pandemic situation in India, the company may suffer supply difficulties. Premiumization of sectors will be another focal area for Bajaj Auto in the future.

Result highlights of Q1FY22

  • Bajaj Auto recorded total revenue from operations of INR 73,860 Mn in Q1FY22, up 140 percent year on year (-14 percent QoQ).
  • Domestic volumes increased by 84.2 percent year over year to 342,552 units, while export volumes increased by 160 percent to 556,753 units.
  • Due to a strong increase in input costs in the quarter, EBITDA margin fell 270 basis points QoQ to 15.5 percent (+165 basis points YoY), and EBTIDA for the quarter was INR 11,177 Mn (+174 percent YoY).
  • Net Profit for the quarter was INR 11,699 Mn (+122 percent YoY), with NPM at 16.2 percent (-168 bps YoY).

KR Choksey expects the stock of Bajaj Auto to hit at least Rs 4,352 as against the current market price of Rs 3836.

Bajaj Auto

Bajaj Auto

“We retain our positive stance on Bajaj Auto based on its resilient performance especially in the export markets and the company’s ability to control costs amid demand slowdown. We continue to assign a P/E multiple of 24x on FY23E EPS of INR 180 per share and maintain our Target Price of INR 4,352 per share; implying an upside potential of 13.4% over the CMP. Accordingly, we reiterate an “ACCUMULATE” recommendation on the shares of Bajaj Auto Ltd,” KRChoksey said in its research report.

Taking cues from the Q1FY22 performance, both the domestic and export market is expected to witness a slower recovery due to the piling up of inventory. Margins were under pressure due to an increase in raw material prices. On the other hand, the domestic demand continued to remain under pressure. However, the earnings of the company have witnessed a CAGR growth of 4% from EPS INR 140 in FY16 to EPS INR 168 in FY21, the fall in earnings was mainly due to disruption in production and sales amid nationwide lockdown, it added further.

CMP: Rs 3,836

Target: Rs 4,352

Potential Upside 13.4%

Market Cap (INR Mn): INR 1,110,023

Recommendation: ACCUMULATE

Sector: Automobile

Disclaimer

Disclaimer

The stock recommendations are picked from the brokerage report of KRChoksey. However, neither the author, nor the brokerage, nor Greynium Information Technologies should be held responsible for decisions taken and losses incurred based on the above article. Investors should understand that there are inherent risks involved when investing in the markets. They should hence exercise due caution.



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To strengthen TReDS, Factoring Amendment Bill passed by Lok Sabha, BFSI News, ET BFSI

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The Factoring Amendment Bill which was introduced in the Lok Sabha last year was passed on Monday. The Bill seeks to amend the Act of 2011 and widen the scope of entities which can engage in factoring business.

This Bill is aimed at increasing the traction on the Trade Receivables Discounting System (TReDS) platform introduced by the Reserve Bank of India in 2014.

The Bill will also help the micro, small and medium enterprises (MSME) which are plagued by the issues of delayed payments. Finance minister Nirmala Sitharaman said that the government had also accepted the recommendations by the Standing Committee which had looked into the Bill last year.

Commenting about the Bill, Ram Iyer, Founder & CEO, Vayana Network, said, “This has been a much-needed intervention. Allowing non-NBFC factors and other entities to undertake factoring is expected to increase the supply of funds available to SMEs. This may result in bringing down the cost of funds and enable greater access to the credit-starved small businesses, ensuring timely payments against their receivables. The recommendations of the Standing Committee are expected to increase the traction of TReDS platforms. Steps like integration with GSTN, mandatory listing of the government dues and direct filing of charges will improve the operational efficiency and acceptability of the platforms among the financiers.”

TReDS, which was introduced to improve liquidity with small businesses, has not been able to take off properly. According to the data accessed by ET, of the total transaction volume of about Rs 36,000 crore conducted by the three TReDS exchanges in India so far, only Rs 2,700 crore was from central public-sector enterprises (CPSEs).

TReDS works as an exchange between lenders, buyers and MSMEs. Lenders bid to settle the claims of an MSME supplier upon the acknowledgment of the invoice by the buyer. The buyer then repays the lender, which is usually a bank, after a predetermined period.

There is no collateral involved, and lenders consider the buyer’s credit rating while paying the supplier. RXIL, Invoicemart and M1Xchange are the three TReDS platforms.

(With inputs from ET Bureau)



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