Nine banks buy stakes in ONDC, will integrate their MSME customers with the network | The Financial Express

Nine banks buy stakes in ONDC, will integrate their MSME customers with the network

Ease of Doing Business for MSMEs: The banks would be able to leverage transaction data from the network to deliver credit to suppliers, sellers, logistics providers and the entire supply chain, said the report.

Nine banks buy stakes in ONDC, will integrate their MSME customers with the network
National Payments Corporation of India, an initiative of Reserve Bank of India to enable digital payments, was also planning to buy stakes in the ONDC network.

Ease of Doing Business for MSMEs: Nine banks have picked up stakes in the government’s project to democratise e-commerce Open Network for Digital Commerce (ONDC) to set up buyer platforms, reported Business Standard on Friday. The lenders are planning to take the existing customers from micro, small, and medium enterprise (MSME) into the platform and help them grow their business, the report mentioned. Both public and private sector banks have picked up stakes in the network. State Bank of India (SBI), Bank of Baroda, Punjab National Bank, Kotak Mahindra Bank, Axis Bank, HDFC Bank, IDFC First Bank and ICICI Bank own 6.35 per cent stake each in the network while Kolkata-based UCO Bank owns 3.17 per cent stake.

Furthermore, the report mentioned Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) have also bought 6.35 per cent stakes each. It was earlier reported that National Payments Corporation of India, an initiative of Reserve Bank of India to enable digital payments , was also planning to acquire stakes in the network. 

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The banks have shown interest because they believe that ONDC will produce large amounts of data related to credit, debit, vendor payments and escrow payments enabling the lenders to offer their entire payment stack to players in the ONDC network and make a deeper foray into the payment and settlement sector, the report noted.

Moreover, the banks would be able to leverage transaction data from the network to deliver credit to suppliers, sellers, logistics providers and the entire supply chain, the absence of which was restricting lenders on making credit decisions. 

The lenders told Business Standard that a business credibility index for banks is also expected to be built to understand more about small and mid sized businesses and offer products that meet their credit requirements.

To attract the digital-savvy younger generation is in the interest of the banks like SBI and hence it is important to join the network, two senior SBI executives told Business Standard. 

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“That can only happen when a bank is actively present on a platform (like ONDC), with users transacting even small-value purchases in the digital commerce space. Not being present on a platform which is increasingly becoming the mainstay of a digital revolution will be a threat to retain existing business,” they observed. 

“As for the system, ONDC, which would work as an open public digital infrastructure, will increase the ease of doing business online,” they further said. 

Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank, said , “As the network kicked off, some banks, including Kotak Mahindra, joined as early participants.”

“Banks play a pivotal role in the economy, more so in trade and commerce. ONDC will see large volumes of credit, debit, merchant settlement, and escrow payments. To build a trust-based network between the buyer and seller, virtual and escrow accounts will be crucial components,” said Sharma.

Several banks that have adopted the Open Credit Enablement Network, a protocol helping platforms and markets called Loan Service Providers to link to banks and non-bank lenders in order to digitize the process, are building goods and services tax invoice and cash flow-based credit decisioning and lending models to extend to ONDC network, said Sharma. He added, “As the ONDC network rolls out and matures, there will be greater value for all participants across the ecosystem.”

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