The Micro, Small and Medium Enterprises (MSME) sector is the growth engine of the Indian economy that not only contributes massively to the GDP but also provides employment to millions.
However, time and again they have to withdraw from their future plans due to unavailability of affordable working capital. The cash crunch, then, results into either shutting shops or limiting potential.
But for how long can we turn a blind eye to this rising demand? As MSMEs hold a prominent space in the Indian economy, the State Bank of India (SBI) decided to address this grave issue and launched a number of attractive schemes under its MSME loan finance umbrella.
One the schemes that has turned eyeballs is their electronic dealer financing scheme (eDFS), which targets dealers.
Rajnish Kumar, Managing Director, SBI, said, “For any country, MSMEs play a very critical role. As they adopt technology and innovate, even the banks need to do so. The first effort has to be to bring down the transaction cost as well as the financing cost of MSMEs. So, we support them in bringing down costs through enabling them through tech and innovation.”
One of the ideal examples of the success of the eDFS is Tee Emm Motors that runs a fuel station on the Ambala-Chandigarh Highway. They acquired the Indian Oil Corporation (IOC) dealership and took SBI’s help in going cashless and cash rich.
With an aim to expand their business, Tee Emm Motors approached SBI in 2014 that offered it a novel scheme that helped change the TDS rate at which they traditionally procured fuel from Indian Oil.
The eDFS platform has simplified businesses in more ways than one. From low-interest rates to zero transaction costs, SBI has made transfers hassle-free and convenient for every dealer.
The scheme provides finance to authorised dealers/stockist/distributors of large industry majors. The amount of facility is need-based and there is no margin, which means 100% funding.
Saurav Sapra, Partner, Tee Emm Motors, said, “We have to make payments to IOC every day. The main benefit which we received as a petrol station through SBI’s eDFS was we could make payments online to the Indian Oil any moment, any point and anywhere in the world. And timings were convenient to us, we can transfer even on a Sunday.”
eDFS has a customer-friendly application that allows the customer to execute high-value transactions in no time through a secure medium.
SBI is indeed strengthening its relationship with the MSME world. Even in the corporate set-up, the biggest lender is financing its supply chain partners through his scheme meant for a niche segment of manufacturers.
SBI’s electronic vendor finance scheme (eVFS) addresses the need of that segment that caters to big industries.
Sanjay Srivastava, General Manager, SBI, said, “We built a specific product for these manufacturers and developed a technology with minimal human intervention, providing a platform for vendors who produce goods for the corporate, raises invoices, etc. We give 100% discounting at a very competitive price. The borrower has to be manufacturing something for a specific corporate and SBI should have a tie-up with that corporate.”
The purpose of the eVFS is to provide finance to vendors/suppliers of large industry majors. The eligibility is that the suppliers/vendors should be of identified industry majors and amount of facility is also need-based with zero margins.
One of the beneficiaries of this scheme is Mumbai-based bulk tanker manufacturer Meher Hermanns, a joint venture founded in the year 2000 between Germany-based Hermanns Technology and Mumbai-based Meher Trailers.
Anil Tandon, Managing Director, Meher Trailers, said, “Meher-Hermanns is a joint venture Indian German company, specialising in transporting bulk dry materials. This was the product line which we, together with Hermanns, brought to India. When the Golden Quadrilateral project started in 2004, we started selling in huge numbers. Our bulkers were coming in very handy. That was a start point for us.”
The growing demand for bulk tankers paved way for strategic agreement with Tata Motors.
“We needed quicker cash flow. We took up the eVFS and got capital faster, which helped us in paying to our suppliers faster. We got better cash flow, brought costs down and got into a comfortable cash flow system,” said Tandon.
The SBI is certainly helping MSMEs optimising cash flows, innovate supply chains and get into a comfortable position.
The success of these two schemes is evident and will surely help other MSMEs. Watch these inspiring stories on November 18 at 4 pm. Watch the episode below!
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Updated Date: Nov 10, 2017 15:02 PM