Owing to the pandemic, banks have become averse to issuing credit card facilities to MSMEs even as there is a need by such enterprises for credit cards to pay for employee salaries, buy goods, manage working capital, etc.
U Grow Capital on Thursday had announced an MSME-focused co-branded credit card solution in partnership with SBM Bank India, a step-down subsidiary of SBM Holdings (erstwhile State Bank of Mauritius), powered by RuPay and EnKash. U GRO is looking to acquire a 1 per cent market share of the SME lending market by 2025 which translates to around Rs 20,000 crore asset under management. With this collaboration, Nath now seeks a contribution of an incremental around 5 per cent of the AUM target. According to the World Bank estimates, the MSME credit gap is at $380 billion. India has always had a low penetration of credit cards.
The number of credit card users in India stood at 52 million in 2019 but there were only about 3 credit cards for every 100 people in India vis-à-vis 32 cards in the USA, according to a study by ResearchAndMarkets. Corporate credit cards are likely tools for SMEs and startups to boost their working capital requirements along with having the flexibility to pay the bank at a later date. This also helps in expediting supplier payment and early payment discounts. The credit card can be availed by the U GRO Capital borrowers against a fixed deposit with SBM Bank India. The facility would be available for self-proprietors looking for secured business loans, unsecured business loans, and machinery loans from U GRO Capital.