Snapdeal launches billion-dollar loan plan for its merchants

Online marketplace company Snapdeal is planning to offer capital assist loans worth $1 billion to its sellers in the next three years. The move is to ensure that the merchants on the Snapdeal platform, now at 200,000, stay loyal.

The Kunal Bahl-led firm wants to add 1,000 sellers every three months in its loan scheme. "We are targeting a total loan disbursal of Rs 6,000 crore by the end of 2017-18. We would do the financing with the help of participation of 22 banks and non-banking financial company (NBFC) partners," said Vijay Ajmera, senior vice-president, capital assist, Snapdeal.

Recently, Snapdeal's biggest rival Flipkart began a pilot with 250 sellers and disbursed loans worth Rs 50 crore in collaboration with top banks and financial institutions. The Bengaluru-based e-commerce firm will now extend the pilot to all its 80,000 sellers.

In October, Snapdeal had said it would support small and medium enterprises (SMEs) and merchants with up to capital assist loans worth Rs 1,000-crore over the next six months.

"We are financing the loans 100 per cent through banks and NBFC partners. While 70 per cent of the loans are for less than Rs 10 lakh, which helps aid a large number of our smaller sellers to grow and expand their business, 30 per cent of loans are for above Rs 10 lakh," Ajmera added.

Under the scheme, pre-approved loans are offered to assist sellers to scale operations.

"Though pre-approved loans are common place for individuals, this was the first time they were rolled out for SMEs in India. Under this programme, working capital collateral free loans amounting to Rs 1 lakh to Rs 1 crore are availed. The loan offers were made on the basis of sellers' previous sales history with Snapdeal," said Ajmera.

The company has given out loans to sellers in around 300 cities in India, as of now. It is also planning to work with the government and provide loans to village level entrepreneurs and also provide them a platform to sell their products.

To ensure the loans given out do not turn into bad debts, the company has developed a strong analytics programme built to check for warning signs that a seller might not be able to pay the loans. "Such early warning systems have ensured we have a return on investment of 13 per cent, which is quite a lot," said Ajmera.

Kunal Bahl, co-founder and chief executive of Snapdeal, had earlier said ideally, capital assist schemes like theirs should not exist. "If the eco-system of finances was friction-free enough, e-commerce companies need not get into the system of facilitating finances," he had said.

Keeping sellers happy has become very important for these online marketplaces. The more sellers an online portal has, the more stock keeping units per product would be able in their kitty for sale.

However, of late, deep discounting and dwindling profits have made sellers wary of online marketplaces. Hence, such loan assist programmes are the best way to ensure sellers are with them for the long haul.

Snapdeal.com has an assortment of 15 million products across 500 categories. It has partnered with several global marquee investors and individuals such as SoftBank, BlackRock, Temasek, Foxconn, Alibaba, eBay, Premji Invest, Intel Capital, Bessemer Venture Partners, and Ratan Tata, among others.

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NEW MOVES

• The move is to ensure that the merchants on the Snapdeal platform stay loyal
   
• The company has given out loans to sellers in around 300 cities in India, as of now
   
• It has developed a strong analytics programme built to check for warning signs that a seller might not be able to pay the loans
   
• Recently, Snapdeal's biggest rival Flipkart began a pilot with 250 sellers and disbursed loans worth Rs 50 crore in collaboration with top banks and financial institutions

Your social media profile may soon be your ticket to a loan or a credit card

Do you have a number of friends or followers on Facebook, and other social media platforms? Do you get a good number of likes on your posts and professional updates? If you are answering in the affirmative, there may be good news for you, as some lenders may assess your creditworthiness based on your social media footprint in the not so very distant future, notwithstanding your CIBIL score!

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Though it may sound a bit far fetched at this point of time, especially for us Indians, these methods of alternative scoring may be a reality for us, sooner than we can imagine. In technical parlance this kind of scoring method is reffered to as ''big data scoring''. And this is why is it may become popular soon.

Moving beyond the traditional

There is no denying the fact that it is a difficult task for lenders to assess the creditworthiness of an individual. So far, a traditional three digit credit score has been used as a metric for judging how much risk there would be in lending to person. In the Indian context, the CIBIL score that is available with India’s premeire Indian credit bureau, CIBIL, is widely accessed by lenders. This is because it is easily available and inexpensive. In fact, the Reserve Bank of India has now made it mandatory for all banks to base their initial judgement based on the CIBIL score.

Lenders therefore are on an overdrive at the moment to educate the general public and their potential customers at large that in order to maintain a good CIBIL score, one must maintain good financial habits such as re-paying credit card outstanding amounts, keeping overall credit utilization under 30% and re-paying loan installments on time. While there is no undermining the importance of maintaining these good financial habits, the fact remains that the current credit scoring system may ''punish the guilty'' with a ''sentence that may be larger than one's crime''.

In other words, there may be untoward circumstances in one's life like a job loss, an accident or a death in the family that may throw one's finances in a complete state of disarray. This in turn may lead to poor credit score because of his inability to repay his debt on time. On the other hand, these may the times, when he is likely to be in most need of credit. However, under such a situation of duresshe will be unable to have any access to credit because of an unflattering CIBIL score.

Betting big on big data

But what if the lenders consider an alternative scoring method instead? In cases where the  credit report of a person has a blotch, the bank may consider  the person's personal data that may be found on social networking sites such as Facebook, LinkedIn and Twitter to assess his credit risk in addition to his CIBIL score. A person’s reputation online, his professional contacts and the value of his opinions can be a metric of his social standing and thus can be used to assess his credit risk. In today’s world of increasing digital footprint, this does seem like a viable option, given the fact that big data assessment systems are sophisticated and have a large positive impact across industries.

In fact, this method of ''open scoring'' as it is now being termed, has already commenced in the west. The Fair Issac Corporation or FICO in the United States of America , that publishes a score based on the consumer credit files based on the data available with three credit bureaus (Exeperian, Equifax and Transunion) is in the process of unveiling a new ''alternate scoring model'' for proving the creditworthiness of those whose FICO scores are not upto the mark because of bad or non existent credit. This will give a chance to a number of consumers to improve their FICO score.

Future perfect

This new scoring model is likely to use data such as utility bill repayment history, cell phone bills and cable bills and may later extend to social media data as well.  As a result, American lenders will get access to a huge untapped market (approximately 15 million people) whose FICO scores are not so flattering at the moment. These are the people who have bad credit because of the impact of a major financial event or those who do not have a credit history because they have not used credit in the past.

Once these methods of alternate scoring become a norm in the developed markets, it is only a matter of time before India adopts such practices. There is enough reason to believe that this may happen soon, given the historical evidence.In the late 90’s when credit bureaus became big in the USA, India understood its merits and the retail banking system began using credit scoring models by mid 2000. And that was the time when social media had not been so rampant, and neither were hand held devices such as smartphones or tablets that popular. Today, the scenario is different. With the improvement in the economy, the aspirations of people are rising and so are the number of internet users.

According to the Internet and Mobile Association of India there are approximately 300 million internet users in India and this number is projected to go up to  approximately 600 million by 2018. Out of these approximately 225 million (source: www.statista.com) , are projected to be users of social networking sites. Needless to say then, that the scope is huge especially in the Indian context. Indians traditionally have been wary of credit and thus do not have a good credit score for the lack of credit history. Besides, alternative scoring models may prove to be a disruptive when it comes to financial inclusion in India as well.

Long story short, those of you who have scant CIBIL scores and are dreading the fact that you may not get access to credit, there may be hope in the offing for you, if you are an active social media participant. However, this must not be used to have bad financial habits or not making an attempt to maintain a good CIBIL score. At the moment, one still has to maintain a score of 750 and above if one aspires to get a loan product or a credit card in India. And this norm will not change right away.

RIL, telcos among 11 firms to launch payments banks

The Reserve Bank of India (RBI) on Wednesday allowed 11 business houses, including Reliance Industries, the Aditya Birla group and leading telecom companies Airtel and Vodafone to start payments banks.

Bharti Airtel and Reliance Industries had earlier tied up with Kotak Mahindra Bank and State Bank of India, respectively, for payments bank operations.

The Reliance-SBI payments bank has an ambitious plan to cover 250,000 villages and 5,000 towns in three years. While it plans to start with a Rs 100-crore capital base, this will be ramped up to Rs 400 crore in three-four years, depending on business volumes.

NEW BANKERS ON BOARD

Reliance Industries Aditya Birla Nuvo Vodafone Bharti Airtel Department of Posts Vijay Shekhar Sharma (CEO of One Communications, which runs PayTM) Cholamandalam Distribution Services Tech Mahindra National Securities Depository Ltd Fino PayTech Dilip Shanghvi (Sun Pharma promoter)

“This partnership brings together the combined strengths of two of India’s Fortune 500 corporations committed to making a transformative impact on India's financial inclusion landscape. We see this licence as an opportunity to promote financial inclusion,” said SBI Chairman Arundhati Bhattacharya.
The Department of Posts and Aditya Birla Nuvo, both unsuccessful in race for universal bank licences last year, succeeded this time. Welcoming RBI's decision to announce payment banks, Finance Minister Arun Jaitley called the move a significant one. He said it will bring in more money into the system and spread the reach of banking to rural areas. “RBI giving payments bank licences is a significant and important step. Payments banks will reach out to people in rural areas.”

A finance ministry official who did not wish to be named said: "We believe that private players are better equipped to start payments bank operations."

Vijay Shekhar Sharma, chief executive of One Communications (which operates fast-growing mobile wallet company Paytm), and telecom major Vodafone were also among the successful candidates. The other applicants that received RBI's approval for rolling out payments banks were Sun Pharma promoter Dilip Shanghvi (who had applied in his own name, and not as Sun Pharmaceutical Industries), information technology (IT) firm Tech Mahindra, payments technology provider Fino PayTech, financial services provider Cholamandalam Distribution Services, and National Securities Depository Ltd (NSDL).

Tech Mahindra said it would partner Mahindra Finance for payments bank. “This will allow both the digital and physical aspects of business to come together. Technology is breaking barriers and creating opportunities for new business models to emerge,” said Tech Mahindra Chief Executive & Managing Director C P Gurnani.

ON COURSE What payments banks can and cannot do

CAN Accept demand deposits from individuals, small businesses and other entities Hold a balance of up to Rs 1 lakh per individual Set up branches, ATMs, correspondents; issue debit cards; offer internet banking Accept remittances to be sent to multiple banks, or receive remittances from them Distribute mutual fund products, insurance products and pension products; undertake utility bill payments CAN'T Accept NRI deposits Issue credit cards Set up subsidiaries to undertake non-banking financial services activities Offer other financial/non-financial services of promoters along with payments bank services

Norwegian telecom giant Telenor has also entered into a deal with Dilip Shanghvi and infra financier IDFC to venture into the payments bank space. “We believe payments bank facilities are a step in the direction of enabling last-mile connectivity to consumers,” a joint statement from Shanghvi and Telenor said.

Payments banks will mainly deal in remittance services and accept deposits of up to Rs 1 lakh. They will not lend to customers and will have to deploy their funds in government papers and bank deposits.

These entities, which are required to have an initial capital of Rs 100 crore each, will have to start operations within 18 months. The promoter's minimum initial contribution to equity capital will have to be at least 40 per cent for the first five years.

This is for the first time in the history of India's banking sector that differentiated licences are being given out by the central bank for undertaking specific activities. RBI is expected to come out with a second set of such licences - for small finance banks - and the process for those is in its final stage. The move is seen as a major step in pushing financial inclusion in the country. Bringing more people into the formal banking system has been a stated objective of both RBI and the government.

By granting 11 banking licences in one go and promising that licences will be offered 'on tap' after gaining experience from the current exercise, the central bank has also shed the tag of being conservative. The time taken to give these licences was lowered; the process was completed within a year, compared with four years for universal banking licences given out last year.

The 11 candidates for payments bank licences were chosen from among 41 applicants, after applying fit-and-proper criteria, and successful track record in conducting business for five years. An external advisory committee (EAC), headed by RBI board member Nachiket Mor, scrutinised all applications and sent its recommendations.

"The recommendations of the EAC were an input for an Internal Screening Committee (ISC) consisting of the RBI governor and the four deputy governors. This ISC prepared a final list of recommendations for the Committee of the Central Board (CCB)," RBI said in a statement.

The CCB, which met on Wednesday, approved the announced list of applicants.

"In arriving at the final list, the CCB noted it would be difficult at this stage to forecast the likely most successful model in the emerging business of payments. It further noted that payments banks could not undertake lending and, therefore, believed the payments banks would not be subject to the same risks as full-service banks," RBI added.

Among the unsuccessful applicants were the prepaid payment instrument (PPI) providers like One MobiKwik Systems and Oxigen Services. They would be disappointed as the central bank had said in its final guidelines that PPIs would be considered for licences.

RBI, however, kept the door open for the unsuccessful candidates, saying they could qualify in future. "Going forward, the Reserve Bank intends to use the learning from this licensing round to appropriately revise the guidelines and move to giving licences more regularly, that is, virtually 'on tap'. The Reserve Bank believes that some of the entities that did not qualify in this round could well be successful in future rounds," RBI added.

SpiceJet launches EMI payment scheme to book tickets

Budget passenger carrier SpiceJet on Thursday launched a unique ticket purchase scheme through which passengers can pay through equated monthly installments (EMIs). 

"We are confident that this scheme will make air travel more economically-viable than ever before for those customers who want to travel now, but pay later," Debojo Maharshi, chief marketing officer of SpiceJet was quoted in a statement. 

According to the company, the 'Book Now, Pay Later' scheme allows passengers to pay as per their own schedule. 

Passengers holding credit cards issued by Axis, HSBC, Kotak, and Standard Chartered can pay through EMIs between three and 12 months. 

The interest rates charged through the scheme will range between 12 and 14 per cent, compared to a typical credit card interest rates in excess of 36 per cent.

Top 10 Best Companies to Work For in India

Delhi-based IT firm RMSI is the best company to work for in India, according to the latest report published by the Great Place to Work Institute. Google India has slipped to the second spot after topping the list last year, the report said.

In the last year rankings, RMSI was ranked at fourth position while Intel Technologies and Marriott Hotels India stood at second and third respectively.

Microsoft India is at 20 in the new list, with an employee count of 6,931 people.

Among state-owned companies, National Thermal Power Corporation (NTPC) emerged as the best public sector firm to work for in India, overthrowing oil refiner Indian Oil Corporation (IOC).

Here is the List of Top 10 Best Companies to Work For in India:

1. RMSI

RMSI provides IT services for various domains such as utilities, wireless telecommunications, information management, agriculture & natural resources, risk and insurance.

RMSI has a total employee count of 842, with offices in US, Canada and UK apart from India.

2. Google India

Google's employee base in India is nearly double of RMSI's global workforce. It currently employs 1,678 people. Google Inc. plans to set up its biggest development centre outside the US in Hyderabad, with an outlay of Rs 1,000 crore. Expected to be ready by 2019, the facility will be the first company-owned campus in Asia.

3. Marriott Hotels India

Marriott Hotels currently employs 6,500 people in its hotels across several Indian cities. The International hotel chain opened its first hotel in Goa in December 1999 and later expanded its operations to several other cities.

4. American Express India

New York-based American Express, also called as Amex, has an employee count of 9,036 people in India at its two centres in Gurgaon and New Delhi. Its operations include back office services and credit card business.

5. SAP Labs India

German multinational software firm SAP Labs currently has 4,844 employees at its offices in Bangalore, Pune and Gurgaon.

6. Godrej Consumer Products Ltd (GCPL)

Mumbai-based GCPL is a consumer goods major in the country with a product portfolio of soaps, hair colourants, toiletries and liquid detergents. It has 2,228 employees in its manufacturing, sales and distribution divisions. GCPL has seven manufacturing facilities in India.

7. Intuit Technology Services

Intuit India, a subsidiary of US-based Intuit Inc, currently has 806 employees at its office in Bangalore. Intuit started the Indian office in April 2005 and it is one of its two development centers outside the US.

8. Accor Hotels India

Paris-headquartered Accor Hotels employs 3,690 people at its hotels in India. Accor is a French hotel group, with operations in 92 countries.

9. Forbes Marshall

Pune-based Forbes Marshall is an engineering and energy conservation solutions provider employing 1,417 people. The company had established its first factory in 1958 in Pune. It currently has four manufacturing plants in the country.

10. Lifestyle International

Domestic fashion retailing chain Lifestyle International employs 10,820 people across its retail outlets in 26 cities in the country.

CitiBank India numbers for FY 2014-15

Citi India, the Indian unit of global banking giant Citibank, said its pre-tax profit rose 15.8 percent in the year ended March to Rs 5,923 crores from INR 5,113 crores in the previous financial year.

Citibank is not obligated to report its results publicly as it is not listed in India.

Profit After Tax rose 18.3 percent to INR 3,423 crores from INR 2,893 crores.

As on March 31, 2015, Citibank India’s total assets were INR 138,776 crores, with advances growing by 7.7 percent to INR 60,896 crores.

The Bank’s deposits grew 13.5 percent during the same period, and the CASA ratio stood at 49 percent.

As on March 31, 2015, the Bank’s capital adequacy ratio stood at 15.3 percent and the net NPA ratio improved to 0.4 percent from 1.24 percent.

Operating Expense to Net income ratio stood at 34.3 percent for the period ended March 31, 2015. For Citi India as a whole, total assets including credit extended to Indian corporate clients from offshore branches stood at INR 180,028 crores as on March 31, 2015.

Citi India added 2,244 employees over the past year, bringing the total number of employees to 12,044. Of the total employee base, Citi Service Centers housed under Citicorp Services India Private Limited (CSIPL), engages around 5,700 professionals across 5 locations in India.

Citibank India said it had extended loans of INR 6,208 crore to agriculture, weaker sections and micro and small enterprises as well as INR 10,572 crore towards export credit as on March 31, 2015

Citi India was the No.1 investment bank in both, announced and completed M & A , and concluded deals worth approximately INR 71,800 crore during this period.

Citi India also helped raise approximately INR 103,000 crore of equity and debt capital for its clients, preserving its status as the preferred investment banker in the country during this period.

In this space, Citibank competes with the likes of Kotak Mahindra Bank and Edelweiss.

Citibank India held a 5.7 percent market share of India’s domestic payment flows and 7.00 3 percent of India’s merchandise and software services trade flows and holds a 15.5 percent market share in Foreign Exchange merchant flows as on March 31, 2015, a growth of 2.9 percent over the same period last year.

“Citibank India is a leading custodian serving around 44 percent of Indian asset managers and managing approximately 30 percent of Foreign Portfolio Investor flows in India as on March 31, 2015,” the US-based bank said.

Citibank India has 1.2 million retail customers and has 2.4 million cards in force through a network of 45 branches across 28 locations, with the addition of three new branches in Nagpur, Thane and Serilingampally during last fiscal year.

Citibank India also claims to have card-spend of 1.5 times of industry average and a 15 percent market share of overall credit card spends in the country.

Citibank India has 8 percent market share (in value terms) of IMPS transactions amongst banks for the period ended March 31, 2015 with just 0.5 percent share of the total banking accounts in 8 India.

“Citibank India is the first bank in India to leverage IMPS on ATMs to enable ATM funds transfer to any bank account in the country and is amongst the first banks to enable transfers through SMS in India during this fiscal period,” it said.

Online Payment In India Accounted For 14% Of Total Transaction Amount In FY 2015

During the dawn of eCommerce industry in India, people were not comfortable using their credit/debit card data online for payments and were often shying away from purchasing online. However, with better security measures and multiple online payment channels today, cashless transactions have seen an ultimate leap surpassing the paper-based transactions in India in FY 2015.

As reported by The Economic Times, paper-based transactions cleared through cheques in FY 2015 (April 2014 – March 2015)  summed up to INR 85 lakh crore (US$1.33 Trillion) whereas cashless transactions through credit card, debit card, NEFT, and online wallets comprised of INR 92 lakh crore (US$1.43 Trillion). The total transaction amount in India – exclusive of cash transactions – reached $2.76 Trillion in FY15.

The main reason behind this spike in cashless transactions is the growth of eCommerce industry in India, which allowed consumers to purchase products at discounted rates at the realm of their homes. Also, the new generation is shifting towards hi-tech gadgets and technology to make funds transfer as it’s easier, hassle-free and instant transaction compared to paying by cash or cheque. With online funds transfer or virtual payment system, people can send or receive payments instantly at the touch of a button rather than visiting banks to withdraw or deposit money.

Distribution of Cashless Transactions in FY 2015:

The majority of cashless payments comes from retail electronic clearing which contributes more than 71% of the overall cashless transactions in FY 2015 whereas prepaid instruments contribute only Rs. 21,342 crore (US$3.3 billion) which is not even 1% of the total cashless payments. Payments by cards was also favored by many in FY 2015 which contributed more than 27% of the overall cashless transactions.

Deputy Managing Director (corporate strategy and new businesses) at State Bank of India, Sunil Srivastava informed that,

“At SBI, about 69% of daily transactions happen through alternative channels, including internet, ATM and mobile banking. We see it rising every year with more young people becoming our customers.”, says Sunil Srivastava, Deputy Managing Director (corporate strategy and new businesses) – State Bank of India.

On the other hand, mobile banking is slowly picking up among the consumers with the rise in number of Smartphone users in India. In FY 2015, cashless transactions through mobile banking amounted to Rs. 1 lakh crore which is not that great but still it’s the fastest growing payment option. These low numbers are quite expected as only 1 million customers are transacting using mobile wallets. However, the numbers will improve as it is expected to reach 100 million customers using mobile wallet in the country during the span of next 5 years as Smartphone users in India will grow with time using better connectivity options.

Major Contributors of Cashless Payments:

People in India have realized the benefits of opting for cashless payments as it is easy, secure and fast. The introduction of reward points and discounts have also encouraged a majority of Indians to try cashless payments.

Here are some of the channels that contributes hugely towards cashless transactions:

Retail Purchases Through ECS:

With the evolution of mall culture, consumers are able to locate everything they need for their household at one place. As these malls are equipped with state-of-the-art POS machines, consumers prefer making cashless payments using ECS rather than using cash to avoid the troubles of finding change. With cashless payment system, the exact bill amount is debited without any extra cost making it easier and quicker for the consumers. Retail Electronic transactions have contributed a whopping Rs. 65 lakh crore in total cashless payments of FY 2015.

ECommerce Industry

Given the fact that, the eCommerce portals in the country registered retail sale worth of $5.30 billion in 2014, the eCommerce industry of India contributes highly towards cashless or virtual payments. Offering quality products at the most feasible rates and delivering them right at your doorstep as per your convenience. Although, COD was the most favored payment mode for these sales, large number of sales were registered through cashless transactions as well.

Online Payment of Utility Bills, Recharge etc.

With the introduction of online services like PayTM and FreeCharge, payments of utility bills, as well as recharge for Mobile or DTH service, have become a lot easier. Consumers are often attracted towards these services as they are being offered free coupons and discount of a same value as you pay for bills or recharge.

Remittances

Since its introduction, mobile wallet usage in India is growing rapidly registering transactions worth Rs. 1 lakh crore in FY 2015. Almost 50% of transactions using mobile wallet were made for remittances while the rest contributed to bill payments, recharge for Mobile or DTH service or to book movie or travel tickets online. A part of these remittances were also contribute by the booming freelance industry of India.

The Road Ahead…

All the major Banks in India are trying to promote online transactions in the country including the rural parts of the country. Being a huge fan of e-Governance, Indian Prime Minister – Mr. Narendra Modi has initiated a project estimated at INR 20,000 crores to build a broadband highway connecting 2.5 lakh panchayats across the country. Once fully set up, this infrastructure would help the rural India connect with the urban India while boosting the rate of online transactions in the country.

Apart from the infrastructure to connect every corner of India through the internet, it is also important to improve the average connectivity speed in the country. To offer better and faster internet access to a larger audience in the country, Reliance Jio is all set to launch its 4G services across 800 major cities in India in order. As the majority of Smartphone users are equipped with better and faster internet connection, cashless transactions in India will surely experience a tremendous leap in the coming years.