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Effect of Covid-19 on Small Finance banks

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Effect of Covid-19 on Small Finance banks

  1. 1. IMPACT OF COVID-19 ON SFBs AND FUTURE AHEAD
  2. 2. MENTOR- Dr(CMA) Nandita Mishra Pranav Bharti Ayushman Singh Ashmita Gupta
  3. 3. Small finance banks are a type of niche banks in India. Banks with a small finance bank license can provide basic banking service of acceptance of deposits and lending. The aim behind these to provide financial inclusion to sections of the economy not being served by other banks, such as small business units, small and marginal farmers, micro and small industries and unorganised sector entities 3 SMALL FINANCE BANKS
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  5. 5. WHY TO FOCUS ON SFBs AND MSMEs ? 5
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  7. 7. PRE-COVID SCENARIO » RBI announced certain guidelines for the issuance of ‘on tap’ licences to small finance banks in August 2019. This is aimed at promoting banking facilities for small borrowers and encourage competition. » To take forward ‘Make in India’ campaign of the Government of India, SIDBI has today entered into an MoU with two SFBs viz. AU Small Finance Bank and Suryoday Small Finance Bank, to make available timely and adequate credit at affordable rates to MSE units and to augment credit flow to MSE sector. » During FY2019, total deposits in SFBs jumped 130% leading to an increase in the share of deposits to 59.6% of non-equity liabilities in FY2019 compared with 37.6% in FY2018. 7 https://www.moneylife.in/article/small-finance-bank-deposits-jump-130-percentage-in- fy2019-but-cost-remains-high-report/58892.html
  8. 8. IMPACTS OF COVID-19 ❏ Small financial banks Lose customers ❏ RBI has granted temporary relief to borrowers in the form of a three-month term loan moratorium ❏ Huge amount of NPA cases ❏ Banks stopped working capital loans to business ❏ Share prices of lenders to the bottom ❏ Deposits are already in a precarious position ❏ No physical disbursements possible 8
  9. 9. ADAPTATION OF COVID-19 ❏ AU Bank launched COVID Shield Deposit for Emergencies helps to manage monthly expenses – EMIs, Rent, School Fees & Living expenses at times like these ❏ Going digital with latest technology to reach customers for those in urgent need of fund and provide services. ❏ ESAF ties up with fintech firms a platform for new digital banking solutions. ❏ Increasing workforce now for doorstep banking service to increase customer interactions ❏ Diversification and tie ups for loans ❏ Equitas SFB IPO opens for subscription at discount. ❏ AU Shopping Dhamaka' offer launch - Overall, point-of-sale (PoS) and e-commerce transactions witnessed a surge of 16 per cent ❏ SFB’s are following emotional banking and are becoming more customer-centric. 9
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  11. 11. FUTURE OF BANKING 11 AI BLOCKCHAINFINTECH 11
  12. 12. 12 ➔ Improve predictions and Manage risks ➔ Control Money laundering ➔ Credit decision making ➔ Default rate reduced ➔ Market trends ➔ Personalized banking for customers ➔ Cybersecurity AI IN BANKING
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  14. 14. 14 FINTECH Cost Effective Reduced TAT Online Payments Niche Product/Service E-Wallets
  15. 15. 15 FINTECH GROWTH CURVE
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  17. 17. ⮚ Faster Payments ⮚ Clearance and settlement system ⮚ Fundraising ⮚ Credit and Loans ⮚ P2P Transfer ⮚ Digital Identity verification 17 BLOCKCHAIN IN BANKING WILL BLOCKCHAIN LEAD TO DISRUPTION OF BANKING SYSTEM?
  18. 18. SUGGESTIONS 18 ❏ Micro-skilling, upskilling and re-skilling of employees ❏ Collaborative approach ❏ New risk management methods - AI ❏ Customer-centric approach ❏ Linking Ration shops and unorganized sector - Using APP SFBs will require Rs 5,000-6,000 crore equity infusion for 15-20% CAGR by 2023: ICRA
  19. 19. REFERENCES 19 ⮚ https://en.wikipedia.org/wiki/Small_finance_bank ⮚ https://timesofindia.indiatimes.com/blogs/agyeya/covid-19-affect-on-micro-small-and- medium-enterprises-msmes/ ⮚ https://www2.deloitte.com/content/dam/Deloitte/in/Documents/finance/in-fa-digital- innovations-for-retail-and-sme-banking-noexp.pdf ⮚ www.m-cril.com ⮚ Bfsi.economictimes.indiatimes.com
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