Fintech companies can have a significant role in increasing the flow of finances to the micro, small and medium enterprise (MSME) sector, finds a new survey.

According to the ICCI-IBA survey carried out for the period January to June 2018,respondents said that with innovative technologies and business models, fintech platforms enjoy a competitive edge due to cost-effective operations and fewer regulations than the traditional finance sector, citing that fintech can have a significant role to play in MSME financing.

The tie-up between Banking and Fintech can benefit lenders with additional data, whereby they can enhance market penetration as well as receive early warning signals with respect to any portfolio deterioration, they viewed.

To spread awareness amongst MSMEs about various Government support schemes, banks can collaborate with Fintech companies as digital platform can be effectively used to popularize the schemes, the respondents further said.

Responding to a question on bank financing, 67% respondents among participating banks have reported tightening of standards, steeply increasing from 28% in the last round of the survey.

Proportion of respondents who have maintained credit standards fell to 23% from 67% in the last round.

Since RBI had signaled tightening of the monetary policy by increasing the repo rate in view of expectations of higher inflation, banks had also increased their lending rate.

Banks have already started offering higher interest rate on deposits which also increases their cost of funds. 

Further, in view of the stress in the asset portfolios, banks have generally adopted a cautious approach on lending to prevent fresh slippages. It is pertinent to note that increase in deposit rates would benefit the millions of depositors who have been getting lower rate for quite some time.

In the first half of 2018, RBI hiked the repo rate by 25 bps in June 2018. As per the survey, over half of the respondents (55%) have increased their MCLR by up to 20 bps during the period Jan-Jun 2018. Further, 27% respondents increased MCLR by more than 30 bps. Since then another hike in repo rate by 25bps was announced.