How the banking and financial sector helps small businesses for festivals
India being a country of festivals, offers vast opportunities for small businesses to establish and grow. It is seen during important celebrations like Diwali, Navratri, Eid etc. there is a popular critical rise for different items like idols/statues, decorations, handicrafts, artifacts, clothes etc., this which stimulates the growth of small business production.
The holiday season is the perfect time to thrive in a market. This period offers the highest business transactions and revenue increases. But it needs back support, which are the banks and financial institutions that help small businesses get started with a loan. However, it also strengthens their retail lending.
Banks and finance companies play a crucial role
The huge financial backer of small businesses are banks, NBFCs, fintech platforms, etc. that help a business to establish or grow.
They also employ a large number of people. One of the crucial factors for the growth and prosperity of these businesses is the timely availability of finance on reasonable terms.
Ashish Singhal, MD, SVC Co-operative Bank said, “Banks and finance companies step in to provide a variety of products on flexible terms, such as working capital, export finance, bill discounting, unsecured commercial loans, supply chain finance, machinery finance. , microfinance, commercial vehicle loans, commercial equipment loans, etc. Banks and NBFCs also provide support to new borrowers under government supported schemes such as Mudra Loan, Stand up India and CGTMSE.
Organizations, especially small businesses, have faced critical disincentives during the pandemic period. Small businesses are essential to our society and we, as a whole, have an impact on their survival. After covid, PM Modi’s “Vocal for Local” initiative and the programs of banks and financial institutions have been the source to help strengthen Indian small businesses. Competent and persuasive arrangements of financial actors help them in the time of need to push economic development.
Balaji Jagannathan, co-founder and director of Paycorp.io, said: “Fintechs, in general, simplify and speed up the process, the holiday season is just a season of higher volumes. To cope with this higher volume of overtime requests, increase the team to verify borrowers. To make AI and other related algorithms faster, IT does the backend work to keep machines and software in their original state on a daily basis.”
Ready for festive business growth
A business loan is a good option for this. With the help of an unsecured loan or an SME loan, the entrepreneur is not required to contribute out of pocket.
During the festive season, the demand for many goods and services increases dramatically. As small businesses need to prepare in advance to meet demand, which means higher production and inventory leading to more funds invested in working capital, financial institutions are seeing increased demand for loans.
“Typically, the retail, e-commerce, hospitality and manufacturing sectors experience higher demand during the holiday season. As such, banks and NBFCs need to meet this need for seasonal credit to allow small businesses to capitalize on growth opportunities that arise during the holiday season.” Singhal said.
In the era of digitalization nowadays, getting a quick loan online is not a difficult task. Various platforms pay instant loans to users without hesitation. In addition, online banking today easily processes a loan to a customer without the need to be physically present.
“Digitizing banking processes has helped many people source capital from financial institutions within hours. For example, AADHAR-based KYC has been the go-to solution for many lending companies to validate loan applications and help them disburse them on time. The holiday season is the most appropriate time to stock inventory and generate better margins via sales. To secure the additional inventory, there is a relevant need for additional capital” , Jagannathan said.
Strengthen the Atmanirbhar Bharat initiative together
The Atmanirbhar Bharat initiative was launched by Prime Minister Narendra Modi in May 2020 to support the MSME sector and reduce reliance on imported products by improving quality and quantity in the country itself. The banking and financial sector in this case as well as SMEs work together for better economic development.
Singhal on this said, “The SME units are playing a critical role in the success of this initiative through developing import substitutes/increasing production of goods that are currently being imported due to shortage in the local market. The adoption and upgrading of technology by SMEs go a long way towards this goal.”
During festivals, we can see most seasonal items made in India. For example, during covid 19, when there was a ban on imported lights and firecrackers from China, India took the lead in taking the initiative to make the lights and firecrackers itself during Diwali. Likewise, there have been many small businesses as such that are even boosting the “Make in India” initiative with the help of banks and the financial sector.
“The banking and finance sector, which actively supports the MSME sector, will continue to play a vital role in the success of this initiative by providing not only the capital support required, but also support and advice on various government and other programs for this sector,” Singhal added.
Hiking in e-commerce business and online transactions during festivals
As the festive season approaches, India’s e-commerce industry is seeing a tremendous surge in sales. According to a Meesho-Kantar survey, this year 34% of sellers plan to focus on promotions and discounts this festive season. While according to a report by RedSeer, e-commerce businesses expect sales to grow 28% year-on-year to $11.8 billion during this year’s holiday season.
Jagannathan said, “Festivals provide greater opportunity for buyers and sellers to buy/sell their most sought-after products. to do this, they get loans. Similarly, sellers get loans to increase their inventory.
On the other hand, online transactions also increase during festivals. 40% of all trade in India is advanced and $3 trillion worth of payments were processed through digital platforms in 2021, according to a report by PhonePe. Apart from this, UPI transfers increased by $100 billion (Rs 7.7 lakh crore) in October 2021, according to NPCI data.
“The festive season has undoubtedly always been the biggest season for all kinds of sales, whether through offline or online channels. Over the past few years, India has witnessed a remarkable shift towards different modes In addition to the widespread use of wallets, the epidemic and the long-standing impact of the pandemic have also given a major boost to online transactions. Post-covid figures have swelled compared to the pre-covid era, more so when it’s the festive season,” Jagannathan said. .
Most Bank/NBFC Backed Companies During Festivals
Distribution sector: Consumers tend to spend the most during the holiday season and hence the retail sector sees a peak in demand during this time.
E-Com sector: Over the years, e-commerce has become an integral part of the economy and major e-com players usually roll out discounts during the holiday season to attract shoppers. As a result, providers of these platforms are seeing a huge increase in demand and need for additional capital during this time.
Manufacturing sector: The underlying goods needed to meet the additional demand are ultimately produced by industries, which in turn require additional capital support.
Consumer credit : Banks and NBFCs also offer special consumer finance programs during the holiday season. This drives up overall demand during the holiday season.