MUMBAI: In a move which can reduce its Non-Performing Asset (NPA) burden, India's leading banker State Bank of India (SBI) plans to help its SME borrowers to sell their products through leading online market places.
Understanding the potential the online market place has in terms of penetration or reachability, SBI is moving to fund transactions and seller's businesses on leading ecommerce market places like Amazon, Snapdeal and Paypal.
According to PWC's recent report, the e-commerce market in India is expected to reach $22 billion by the end of 2015.
To set the ball rolling, SBI has recently signed a memorandum of understanding with Amazon and set to ink similar accords with domestic e-commerce players such as Snapdeal and Paypal, media reports said.
"Today, we are in a digital age. Giving people (customers) the best experience in buying and selling is what we are looking at. There are thousand ways to bring each other clients under this MoU," Arundhati Bhattacharya, chairman of SBI, said.
Regretting that Indian SMEs don't know how to sell though they have great products, she said, "They should have better selling and buying options."
The bank sees it a multi-billion Rupee opportunity in the years ahead while the move is also aimed at securing its own asset quality, an ET report said.
Small and medium enterprises have a huge share of defaulted loans with SBI and by tying up with e-commerce portals, SBI can help revive business for its SME clients. These companies can obtain sale orders placed on e-commerce portals while they can also source raw materials at discounted rates.
As of December end, the bank's non-performing asset or bad loan ratio was as high as 8.05 per cent for SME clients versus just 0.49 per cent for large corporate clients. SMEs shared 14 per cent of the lender's total loan book at Rs 12.65 lakh crore.
The bank plans to drive an awareness campaign for traditional customers, for whom online buying and selling is still taboo. SBI is exploring avenues to make retail customers increasingly shop online.
According to PWC, India's internet penetration stands at connected households at 4.6 million versus China's 207 million. This alone shows that India's e-commerce penetration is way below the global standard.
According to Forrester Research, an independent technology and market research firm, only 16 per cent of India's total population was online in 2013 and of the online users only 14 per cent or 28 million were online buyers.