MSME in India is one of the most unorganized sectors but this is the sector which employees’ maximum number of labor force in India. The biggest challenges for the MSME is to access finance to grow their business. SME Channels spoke to Pankaj Gadgil Head- Self Employed & MSME Segment ICICI Bank, about their plan for MSME Segment and the future endeavors.
“The MSME will always require assistance and handholding at all points of time, be it the payment collection, be it account opening.”
Head- Self-Employed & MSME Segment
What are the criteria and what are the offerings that ICICI Bank has for the MSME?
So objectively from the bank’s perspective when we look at the MSMEs, we have been able to classify the entire requirement of the MSME into five basic buckets. And those are the principal needs for any MSME to operate. When we talk about these five needs, to begin with they are banking transactions, compliance, lending needs or the asset needs, cross borders which are either export or import, lastly the need of networking which is very critical for any MSME to grow.
So we have kind of pooled our requirement and based our understanding into stages of setup and operating phase and the growth phase and diversification phase. That is the four phases that our offerings are all tuned towards which is something like 2×2. And obviously when we look at these needs, we look at how many of these needs can be fulfilled digitally because for an MSME if you ask me the most important thing is transaction and convenience comes before anything else.
Typically for any business in a startup phase, there are requirements that have to be taken care of. We offer a special account which is called iStartup. We have built it by doing a lot of consumer research, lot of startup research and there are certain requirement that the startup has from the bank which is basically that he will require a waiver on his loan, at least in the first six months, so that he can get his business to lift off.
We have digitized this entire account acquisition process. We have got a smart form which is basically an entire account opening application done on a tablet, and we used the smart form of the tablet to open the current account also for the business. So we set up the business for account acquisition, their product offerings is very specific to the company which makes things easier due to the smart form.
Typically, once the MSME has got setup and he has gone to the operating phase, then there are two things that he will require- how to make the payments and how easy is the process for making those payments. So, we have internet banking platform specially designed for the MSME, we also have mobile banking platform which is called iBizz and we have got a corporate internet banking platform for MSMEs where there are number of solutions that we have built which enable the customer to make payments very effectively.
A very distinct offer that ICICI Bank has got for improving the collection efficiency of an MSME is called Eazypay which is a payment by the customers to the merchant bank, and this is both on the web version and mobile app. It is an integrated platform which helps the MSME to connect very efficiently.
So typically if an MSME has adopted an Eazypay platform and he is collecting money from his end consumers, as all his customers are uploaded on the Eazypay platform, the contact coordinates are put in by the vendor and then message is sent to the customer depending upon the platform that he uses, either a message can come on the mobile or an email where the bill completely gets populated, and there is a link also which is given along with this message where you can open the link, and all the payment modes that are available today digitally and also physically are present there. So the customer can then pay through cash also, you can pay through RTGS and NEFT, you can make payment by debit card, every other mode which is present including UPI. So that is a very powerful tool.
How do you classify MSMEs into different phases? What is the presence of ICICI in Tier 2, Tier 3 cities? You have an app but when it comes to smaller cities, don’t customers want a personal interface as well?
The MSME will always require assistance and handholding at all points of time, be it the payment collection, be it account opening. So, we have 4850 branches across the country. So in these branches we are manned by people who are trained to obviously first acquire the customers. We have about 1500 branches in semi urban cities and about 1000 in rural branches. All our branches are equipped to handle any MSME customers, be it an account opening or be it lending. Our branches are also equipped with the knowledge, education and awareness of these solutions, and they offer it to their local customer which then enhances the usability of Eazypay. It is available in many regional languages, so the customer feels comfortable doing online transactions.
You spoke about handholding the MSMEs as well but because of technology, there are a number of challenges that you are able to overcome when it comes to MSMEs approaching you for finance. What are the other challenges that they face? What are the challenges that MSMEs face on the finance access point of view?
The knowledge of these subdivisions which make the businesses better and we are always pleasantly surprised whenever we do a customer event that people are always enthused about knowing the solution that we are always coming up with. So one challenge I think is to do with continuously updating new things that are happening in this space. The second challenge is that when they are looking at their business the reconciliation becomes a difficulty and with GST, wherein everybody has to go online and make the GST payment. The reconciliation is the large challenge for the MSME. The other thing is that with the advent of newer solutions on the digital side, sometimes there is always a fear of adopting solutions which could compromise on security. So these are broadly the challenges that we look at the MSMEs and for almost each of the challenges, we are continuously making an effort from the bank’s side to make sure that we overcome these.
Now the government has also come up with its own plan to give loans to MSMEs. Are you partnering with companies in this at all? How does this impact your business?
We have started to build our own product, which is the GST OD, or GST Business Loan. It gives unsecured loans to customers, also known as an instant overdraft. And we have till now about 28000 customers who have availed this facility. We are planning to expand it further in the future.
From the government’s perspective, there is a scheme which the government has which provides a fair guarantee, where there is a participation by the government through SEBI where there is SLRP kind of arrangement, and there is insurance cover which we have to buy from SEBI and part of the risk gets covered by SEBI. So there are some borrowers who also avail that scheme and they eagerly come to the bank for that.
You know recently the RBI came out with restructuring plan or restructuring loans than performing loans of MSME. How does ICICI Bank view this and what will be the impact on your assets because of this?
So this policy was always there for some time. We have been always been a part of this as a bank and in fact RBI had only constituted this that there should be a committee which will look at the proposal and I have also been part of this committee. Obviously it helps the MSME because it gives MSME an avenue to present where there are certain delays that have come up, in realizing its corrections. This is another forum which RBI has come up with, that MSME can come up and give us the viability plan for us to take a call whether an asset needs to be lectured or whether there is a correction that is required. So it is a welfare move. This will also enable the MSMEs. This has given them one more forum where they can represent independently to the banks to take a decision. So it is going to be only helpful for the MSMEs.
What are your secured and unsecured financing options available for the MSMEs?
So when I talk about secured lending preposition we have term loan as well as overdraft and cash credit that we offer to our customers. And while protecting the banks credit we have a product called enterprise OD, we got a product called GST OD which relies on the GST returns of the customer and we have also got a product which is called jet OD.
On unsecured side there is a business installment loan that we give to our customers which is like a term loan which takes finance of the customer and then we give business installment loan and we also have insta overdraft.
There is another platform that we have build and we worked with FinTech called Digivation and built a platform called Biz Circle. Biz circle effectively helps our customers and we have also kept it open for non ICICI Bank customers also where they can raise themselves, they can create the e-business card and they can effectively network with any relevant or connected party on that platform. That platform also enables the customer to create an intranet for their own employees. So, the MSME can create an intranet for his own employees, the MSME can also create an e-commerce market place to their bank folk and can actually raise themselves free of cost.
Apart from lending option there is an enterprising platform which is called Arteria that the bank had launched about a year back. Lot of these customers in MSME are typically vendors of corporate structure. And this is basically a bill accounting platform where the bills can be put up on the platform, we are able to upfront or discount these bills and provide lending to the MSME very conveniently.