supply chain: Lenders betting big on supply chain finance

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Mumbai: Indian lenders are betting big on supply chain finance as companies raise their capacities and are building in bigger buffer stocks than before post the disturbances caused by two black swan events – the Covid-19 pandemic and the Russia-Ukraine war.

While ICICI Bank has said it will focus on supply chain finance for future growth,

has onboarded technology providers to offer AI (artificial intelligence)-powered supply chain solutions.
is also focusing on agri-supply chain and is onboarding more than 100 new customers every month.

“Our focus on agri value chain helps us improve the reach; we are adding few 100 customers every month,” said Manish Kothari, head – commercial banking at Kotak Mahindra Bank. “Small companies don’t have the best of balance sheets, but with supply chain we have better data available and we are underwriting better.”

Private lender Axis Bank recently tied up with AI-powered Enterprise SaaS platform actyv.ai, to offer the bank’s supply chain finance solutions to MSME customers. This partnership will enable corporate anchors, downstream dealers and trading partners to avail the solutions.

Banks work with large companies to fund their suppliers at lower interest rates and limited tenures. Currently, the supply chain segment for Indian banks runs upwards of ₹60,000 crore.

ICICI Bank had recently said it will shift focus to supply chain financing to grow in the future as it works to ensure that new risks don’t build up. The bank is seeing strong momentum in new client additions across corporates and vendors in the supply chain segment.

“69% of MSMEs don’t have access to formal financing, if you extrapolate this it could be ₹2 lakh crore of formal financing opportunity,” said Ramanan SV, chief executive officer, India & South Asia, at fintech firm

. “Earlier large PSU banks and some private banks were addressing this market; now we are seeing the second rung of banks also join the fray. We are also seeing NBFCs show interest in this space,” he said.

Several top corporates have faced disruptions in the supply chain since the pandemic, and the situation hasn’t normalised yet due to the disruptions caused by the Russia-Ukraine war. While these impediments have eased since the middle of this year, they have not disappeared. Zero-Covid policies in China are resulting in lockdowns in southern China and in the Beijing region, adding to supply chain woes.

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