SMEs and MSMEs play a vital role in contributing to the growth of the Indian economy. They act as a pillar to the economy as they contribute to employment, exports, and GDP. The last couple of years had been challenging for the SMEs as the financial institutes had underserved them, which consequently had hindered the growth. Transaction; was one of the prime obstacles SMEs had encountered in the last decade.
The positive take away from this scenario is the change that has been observed towards the SMEs by banks. Banks have been accommodating towards SMEs in both rural and urban areas. SMEs have risen to a new face with the support of the Indian Government.
The Government’s promotion for online banking, funding new loan schemes like CGTMSE, MUDRA, and Stand Up India intends to upgrade to online transactions instead of hard cash. These schemes have impacted SMEs massively. Further, the government has taken necessary steps to strengthen online traction by lanching TReDS in 2017. TReDS is an electronic platform where MSMEs can trade receivables and discount bills on large corporates.
These schemes by the Government are steps towards embracing digitization and digital transactions. With bank accounts being compulsory for the citizens, now the digital transaction is possible in rural areas. In addition, other schemes and steps have been exercised (like NABARD) for the growth of the rural regions. The RuPay card will implement the use of plastic money in rural areas and minimize the use of hard cash in the business, which will impact SMEs and MSMEs directly.
Considering the Government’s encouragement towards digital transactions, the banks have expanded their portfolio to digital lending for SMEs. Nowadays, banks are offering business loans to SMEs within 72 hours. The only criteria to meet for this loan is SMEs to have GST. The process for these loans is simplified enough to be accomplished in 72 hours.
In this digital era, digital lending is expanding to new horizons. The financial institutes are adopting the automated processes and digital ecosystem to reduce the efforts and stress of lending decisions. The addition of ‘line of credit’ can easily be considered as the best gift of online lending to SMEs. With the internet being a part of transactions, SMEs can avail easy access to funding with a business line of credit. A business line of credit is a form of business loan in which the amount can be utilized for business purposes.
It would be right to say, the power of digitization and adaption to digital lending is shaping the SMEs in the right space. In the coming years, the demand for digital payments looks promising than ever, which effects SMEs as well. The digital payments are a game changer and key to digitizing the economy.