Micro, Small and Medium Enterprises sector needs to benefit from fintech innovations - RBI Deputy Governor

Reserve Bank of India (RBI) Deputy Governor S. S. Mundra spoke on ‘Coping with the challenges of financial technology innovation in MSME (Ministry of Micro, Small and Medium Enterprises) financing’ at the NAMCABS Seminar organized by College of Agricultural Banking in Mumbai.

He discussed on whether and how fintech innovations can be employed for the financing of MSMEs. He also spoke on the topic ‘A new business model for the next decade: collaboration with the fintech companies’. While talking about fintech, he stressed on the innovations that have enabled big data analytics, blockchain technology, algorithmic trading, and applications, among others.

“MSME sector, which accounts for more than half of the world’s gross domestic product (GDP) and employs almost two-thirds of the global workforce, is virtually the backbone of the global economy. Hence, the sector needs to benefit from the fintech innovations to keep the global growth engine chugging along,” he stated. “Certainly to a large extent, fintech innovations have permeated across the entire Financial Services Value Chain. So, whether it is wholesale banking, wholesale payments, retail and commercial banking, customer relationship or payment services, fintech finds applications across the spectrum.”

The meeting was attended by Simon Bell, Global lead, SME Finance, World Bank Group; Surekha Marandi, Executive Director, Reserve Bank of India; P. K. Panda, Principal, College of Agricultural Banking(CAB) and Chairmen/CEOs of various banks.

Mundra mentioned that small and medium-sized enterprises is a widely underserved market and serves as a major opportunity for fintech startups in order to build and scale up sustainable businesses by offering services like marketplace lending, credit underwriting, among others.

He also mentioned about few RBI initiative measures to expand the reach of banking services for the unbanked population, regulating an efficient electronic payment system and providing alternative options to the MSME sector. These measures include ‘TReDS’ that solves the problem of delayed payment to MSMEs, ‘Udyami Mitra portal’ that aims at instilling ease of access to MSMEs’ financial and non-financial service needs and ‘Payment Banks/ Small Finance Banks (SFBs)’.

“In fact, my vision of a fintech enabled banking system is one in which micro-entrepreneurs receives an online bank credit early in the morning, which they utilize for buying their wares from the wholesale market, sells them during the day, receives payment from customers in electronic form (mobile money), pays back the bank loan at the end of the day and gets the surplus credited to her linked savings account,” he concluded.