Financial Trends To Have Big Impacts On SMEs In The Next 12 Months

March 02, 2017

Financial Trends To Have Big Impacts On SMEs In The Next 12 Months

India has a diversified financial sector that is undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non-banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities.

image courtesy:thefinancialtimes

The banking regulators have allowed new entities such as payments banks to be created recently thereby adding to the types of entities operating in the sector. However, the financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64% of the total assets held by the financial system.

India’s banking and financial services companies will brace for new challenges in the year 2017 as the entry of new types of lenders intensifies competition while high bad loans and demonetisation continue to haunt the sector.

The main challenges for traditional banks and non-banking finance companies would be demonetisation and competition from new-age firms such as payment banks, small finance banks and mobile wallets.

The Financial Trends of India Which Will Have A Huge Impact In 2017:

#1.Rise of SME focused B2B ecommerce     Image result for b2b ecommerce icon

The advent of advanced technology is opening newer channels for businesses across several sectors. This is particularly true for B2B ecommerce firms focused on the Indian SME sector. The presence of innovative technological platforms is bringing on board a rising number of small players including the neighbourhood grocery store. This will be a win-win situation for all involved enabling smoother transactions, procurement of raw .

 #2. Small Finance & Payment Banks    Image result for small finance banks icon 

Of the 10 companies that got in-principle approval to start small finance banks, two have already been listed on the bourses. Several other small finance banks are likely to finalise plans or even go public in 2017.  The impact of the new small finance banks and payments banks will be evident over the medium term since the total assets of all the small finance banks are less than 0.5% of the assets of the banking sector

#3. Improving SME Lending With Growth in FinTech Firms   Image result for fintech icon

A major constraint in the growth of the SME sector has been non-availability of easy finance. Not all small and medium enterprises find favor with traditional banks when it comes to lending courtesy lack of experience, absence of collaterals and infrastructure, poor financials, and small ticket size. Given their significant online presence, several modern fintech banks/institutions are making it convenient for the SMEs to receive loans. 

Majority of the fintech companies are presently viewed only as facilitators of incremental business for financial services companies or banks. However, some of them, including some payment gateways, are likely to become sizeable in the near term. Over the past 2 years or so, more than 35 online lending startups have emerged in India offering attractive funding 

#4. The Good GST      

India’s existing tax system consists of direct taxes, such as income tax, and indirect taxes, which includes the numerous central and state levies like value added tax, sales tax, octroi, and luxury tax. A council set up to decide the rate of taxation has proposed a four-tier tax structure of 5%, 12%, 18%, and 28% with lower rates for necessary items and highest for luxury items.

The GST, the survey explains, will create a common Indian market, improve tax compliance and governance, and boost investment and growth. Experts agree that the GST could increase India’s GDP by 1.5% to 2%.

To conclude, 2017 is going to be a year of progressive changes in the Indian SME sector based on the above-mentioned financial trends. Several policy interventions along with technology and innovation will continue to play a pivotal role in creating a business-friendly atmosphere for the SMEs.






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March 02, 2017

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