SME Times News Bureau | 02 Mar, 2020
an exclusive interview with SME Times, Founder Partner and CEO of Banka and
Banka CFO Services LLP said that growth of Indian MSMEs are stifled by lack of
adequate credit and equity.
of the interview…
tell our readers about Banka CFO and its entrepreneurial journey.
Banka: Banka CFO is a firm constituting of young, social entrepreneurs who have
recognized immediate social problems and seek to understand the broader context
of an issue that crosses disciplines, fields, and theories. We, as young
entrepreneurs want modern businesses to devote their precious time only to core
business activities and trust our services for the remaining business needs. We
structured the consulting services so that our clients will get exemplary
accounting and financial services, and maximize the return in their venture by
having a specialized expert look after their professional services’ needs.
do this by serving as a value-added chief financial officer (“CFO”), finding
hidden revenues, and bringing out best from businesses so that they can have a
better market value. A CFO comes in all shapes and sizes, precisely: The Accountant,
the Deal Maker and The Advisor. At different points in a company, a need arises
for each of these skill sets. We, at Banka CFO excel in all these areas. We
want our clients to have adequate commercial support coupled with new ideas,
top-notch communication skills, leadership abilities, reliability and varied
forms of support. Our primary goal as a trusted advisor is to be readily
available and to provide insightful advice to enable our clients to make
informed financial decisions through proper planning and money management. We
work with a diversified group of professionals having expertise in diverse
fields so as to enable us to cater to our clients' needs to help them grow in
the ever-changing business environment and promote budding startups. We provide
a “one window solution to all their commercial needs.”
does Banka CFO provide financial support to start-ups?
Banka: Unlike traditional corporate businesses, our social entrepreneurship
venture intends to focus on maximizing gains in social satisfaction and
creating a positive social impact to boost the overall start-up ecosystem of
the nation. We take pride in being a service provider exclusively for
start-ups. We help startups recognize and avail many incentives applicable to
them, offered to them by the Government of India.
provide affordable financial solutions to startups that lack access to reliable
accounting, legal, taxation and commercial sources and also help organizations
gain access to loan facilities and debt syndication requirements.
are the other services you provide to MSMEs as regards to accounting, taxation,
legal, commercial services, etc?
Banka: We provide a broad array of services to micro, small and medium
enterprises (“MSMEs”) from their incorporation stage to ongoing operational
support to regular evaluation of the business, ensuring compliances with various
applicable laws and regulations along with providing advisory services on a
case to case basis. For incorporation, we provide services including but not
limited to registration of MSMEs and startups with the Department of Industrial
Policy and Promotion, registration under the Goods and Service Tax (“GST”),
drafting and registration of incorporation documents like partnership deeds,
MoA, AoA, etc., formation of companies. Under our operational support umbrella,
we provide services such as designing of standardized operating procedures for
your businesses, book-keeping, cash flow analysis, payroll management, cost
management while under our business evaluation area, we provide services of
profitability analysis, preparation of budgets, forecasting, internal control
audits, periodic MIS reports for executives. We even provide services to ensure
your business is statutorily compliant such as filing of timely income tax
returns, liasoning with auditors for statutory audits, filing of GST returns
like GSTR-1, GSTR 3B, GSTR 4A, GSTR 9/ GSTR 9C, filing of TDS returns and
correction statements thereto, secretarial support like RoC, RBI and Labour
Laws related compliances respectively along with reporting on International
Financial Reporting Standards (“IFRS”) and Indian Accounting Standards. The
ambit of our advisory services includes services in relation to corporate
restructuring, raising capital, arranging working capital finance, raising
project loans and debt, IPO services, securities law regulations, conducting
due diligence, facilitating M&A transactions, corporate law advisory and we
even offer several litigation support services.
is the current lending scenario in India, particularly when it comes to MSMEs?
Banka: Despite the fact that MSMEs are, collectively, the largest employers in
certain low-income countries, their growth is often stifled by restricted
access to appropriate credit and equity. They have limited access to finances
in spite of contributing a significant share of our nation’s GDP and
employment. Particularly in India, we have Small Industries Development Bank of
India (“SIDBI”) that offers loans to MSMEs engaged in diverse businesses across
remote geographical locations.
banks are in general reluctant to provide credit to these MSMEs on account of
several factors like inter alia small ticket size, unavailability of sufficient
entrepreneurial experience, parameter of being at high risk because of low or
no credit rating, high rate of diversions of funds and absence of collaterals,
insufficient marketing and low competitiveness due to lack of product branding.
The situation is steadily changing as every bank has been making efforts whilst
fulfilling their strategic goals, to give great importance to financing the
MSMEs because they are rapidly growing, flourishing and contributing immensely
to the Indian economy.
targets have been prescribed to the bank for lending to the micro and small
enterprises. Any bank’s lending to micro and small enterprises engaged in
prescribed manufacture or production of goods specified under the Industries
(Development and Regulation) Act, 1951 including notifications and amendments
thereto, is reckoned for priority sector advances. Additionally, bank loans up
to INR five crore per borrower/ unit to micro and small enterprises engaged in
providing certain specified services under the MSME Development Act, 2006, are
also eligible to be reckoned for priority sector advances, however, lending to
medium enterprises is not eligible to be included under aforesaid priority
sector lending by banks.
in terms of the recommendations of the PM’s Task Force on MSMEs, banks have
been advised to achieve a 20 per cent year-on-year growth in credit to micro
and small enterprises, a 10 per cent annual growth in the number of micro
enterprise accounts along with 60% of their total lending to the micro and
small enterprises sector. Additionally, public sector banks have been advised
to open at least one specialized branch in each district. Further, the banks
have been permitted to categorize their MSME general banking branches having
60% or more of their advances to the MSME sector, as specialized MSME branches
for providing better service to this sector as a whole. As per the policy package
announced by the GoI for stepping up credit to MSME sector, the public sector
banks will ensure specialized MSME branches in identified clusters/centers with
preponderance of small enterprises to enable the entrepreneurs to have easy
access to the bank credit and to equip bank personnel to develop requisite
Do you think NBFCs can fill the gap left open by traditional banking? How?
Banka: Non-banking financial companies (“NBFCs”) have been one of the key
players in small business financing thereby playing a vital role in India’s
economic development. The latest entrant in the NBFC basket, peer-to-peer
(“P2P”) lending platforms, now recognized by RBI as NBFC-P2P have simplified
the entire process along with offering attractive rate of interest, thereby
making them very popular with small businesses in a short span of time, thus
proving to be a better choice to raise funds.
NBFCs stand supported by many factors such as superior product lines, low cost,
broader and effective reach, robust risk management capabilities to check and
control bad debts, and proper comprehension of their customer segments.
Further, as per the Financial Stability Report dated June 2019 issued by RBI,
recent developments in the NBFC sector have brought the sector under greater
market discipline as the better-performing companies continued to raise funds
while those with asset and liability management and/ or asset quality concerns
were subjected to higher borrowing costs. In a retrospective light, the NBFC
loans expanded 16.6% annually which was twice as fast as the 8.8% credit growth
across the banking sector on an aggregate level, vide the Financial Stability
Report dated June 2016 issued by RBI.
forward, the latent credit demand of an emerging India will provide NBFCs with
a chance to bridge the gap, particularly in the sectors where traditional banks
were hesitant to serve. As the estimates indicate, more than 50 percent of
MSMEs are not able to access formalized credit. Additionally, improving
macroeconomic conditions, higher credit penetration, enhanced consumption and
disruptive digital trends will give enormous opportunities for NBFCs credit to
rise at a robust rate of roughly seven to ten percent in the coming years.
Please tell us about the future plans of Banka CFO.
Banka: We aim to provide a one-stop solution to every need related to commerce
and finance which leads to ease of doing business in commercial environment and
to be a pioneer in this space. We have a target of catering to 500 startups and
building a team of 100 young, motivated individuals.
would like to build our brand image around that of a specialized firm of young,
individuals providing expert services to startups at affordable prices so that
whilst the start-up entrepreneurs can focus on their growing their business, we
can act as a backbone to look after their financial and commercial needs. By
doing so, we believe that we can boost the Indian start-up ecosystem since we
believe that, only a start-up organization like us can truly understand the
start-up culture and tend to the needs of a new organization.
The views and opinions expressed in this article are those of the authors and
do not necessarily reflect the official policy or position of any department of
the Government of India.