Small Finance Banks as Preferred Banking Partners for Upcoming Corporates: Is there Merit in the Case?

Small Finance Banks is a specific segment of banking created by RBI under the guidance of Government of India with an objective of furthering financial inclusion by primarily undertaking basic banking activities to un-served and underserved sections including small business units, small and marginal farmers, micro and small industries.

On September 16, 2015, the RBI awarded SFB licenses to 10 players on account of the Government’s focus towards financial inclusion and inclusive banking. Out of the 10 SFBs, there were eight microfinance players, one local area bank and one NBFC. The names are mentioned below:

1. Ujjivan Small Finance Bank
2. Jana Small Finance Bank
3. Equitas Small Finance Bank
4. AU Small Finance Bank
5. Capital Small Finance Bank
6. Fincare Small Finance Bank
7. ESAF Small Finance Bank
8. North East Small Finance Bank
9. Suryoday Small Finance Bank
10. Utkarsh Small Finance Bank

How can these Entities impact Corporate Growth?

Under the provisions, they are allowed to lend to micro and small industries. If they proactively reach out to the budding entrepreneurs and aspirational small business entities. This can be a win-win situation.

As per an initial survey conducted by an Advisory firm, the awareness level and perception about Small Finance Banks as Preferred Banking Partners for micro and small industries was not be encouraging.

What are the steps as Business Plan?

Small Finance Banks are in David and Goliath scenario, wherein for the lucrative corporate loan business they have to compete with established PSUs or the more proactive private banks. Hence these Small Finance Banks need to evolve a differentiated Go-to-Market Strategy and reach out to the prospective. This has to be done in cost effective manner also.

If they can develop and work on an effective Strategy Roadmap targeting the MSME/ SMB market, alternately the use a Thought Leadership document titled : India's Trade and Industry Mapped- A Case for Fortune at the ‘Bottom of Pyramid’ based Strategy .

Please find attached the link for the same.

The key features of the document are:

1. Complete Mapping of Indian Corporate Landscape on basis of Trade and Industry Associations / Bodies (categorized in 20 segments).

2. Highlighting certain Trade Sectors in form of Stand-out profiles i.e. Segments which have tremendous potential to offer business to service provides but have not got due attention on business media

3. Apart from national level Industry Associations, certain local level Trade Bodies (State/District/City level) have identified and showcased (mainly from Tier2 and 3 cities like Rajkot, Ludhiana etc) as having great business potential.

This will enable them reach out to the markets in a very cost effective manner through Thought Leadership, beyond their current sphere of geographical and sectoral concentration. This is #thoughtleadershipforindia

For more on how upcoming organisations in the #BFSI space especially #NBFC and #MFI ones can rapidly scale up their operations, Ask for a Concept Note

Siddhartha Guha

Director and Founder CEO

SGMP Thought Leadership and Advisory (OPC) Private Limited

Email: info@thoughtleadership.co.in ,

siddharthaguha1@gmail.com , siddharthaguha1@rediffmail.com

Handphone: +91-9819452045

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