Why is SBI teaming up with ecommerce players?

In a bid to cash in on the burgeoning ecommerce industry, India's Banking giant, State Bank of India has recently tied-up with online players; to boost micro small and medium enterprises...
Why is SBI teaming up with ecommerce players?
In a bid to cash in on the burgeoning ecommerce industry, India's Banking giant, State Bank of India has recently tied-up with online players; to boost micro small and medium enterprises (MSME) businesses by financing new generation sellers using Snapdeal e-commerce portal and facilitating cross-border payments of small units through PayPal's payment gateway, when corporate and industrial credit is yet to show any significant growth momentum.
Aggressively progressing towards digital-commerce industry, SBI has entered into two tie-ups in a single day, acknowledging the fast-changing eco system of modern and digital banking and e-commerce space.Firstly, SBI entered into agreement with PayPal which will further allow SBI debit card holders to use a digital payment gateway for buying products from foreign websites and also enable MSME customers to access a secure payment solution. SBI's partnership was with PayPal which is present in 145 countries is first of its kind in India.
Moreover, the bank teamed-up with Snapdeal for financing the sellers on its platform. E-commerce space is growing very fast and meets the aspirations of the next generation of customers and small businesses.
"Prime Minister's dream of `Make In India' and digital India will get fulfilled by such arrangements," SBI chairman Arundhati Bhattacharya expressed, after signing the MoU with Snapdeal.
Snapdeal has one lakh sellers on board as of now for SBI to pick and choose for financing. Their online sale performance would be a ready reckoner for the lender to initiate dialogue with the sellers willing to take finance and scale up business.
Snapdeal chief executive officer Kunal Bahl said that the financing arrangement with SBI would help its sellers grow in scale and this in turn, will boost its volume of business. Snapdeal gets a commission from the sellers for every product they sale.
Furthermore, SBI had teamed up with another ecommerce giant, Amazon earlier this week.
Well, the question arises that why is this big boy of banking industry betting big on the ecommerce industry.
Known for funding large projects,SBI is getting into what it calls seller financing. From the Reliances, Essars, and the Adanis, SBI is moving to fund transactions and seller's businesses on Amazon, Snapdeal and Paypal. In a report by PWC, the e-commerce market in India is likely to touch $22 billion by the end of 2015.
As per industry insiders, SBI sees it a multi-billion rupee opportunity in the years ahead while the move is also aimed at securing its own asset quality.This is because, the small and medium enterprises or SMEs have significantly defaulted on their bank loans in the past few years as they were worst hit by the economic downturn. By tying up with e-commerce portals, SBI can help mobilize business for its SME clients. Those companies can obtain ready sale orders placed on e-commerce portals while they can also source raw materials at discounted rates.
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