Wants to tap into the “non-served and underserved markets”

Wants to tap into the “non-served and underserved markets”

India’s second largest bank, Bank of Baroda, has got itself an “exclusive” micro lending partnership with Amazon.

The bank says through this partnership it is running a process for underwriting Amazon sellers “who would traditionally not be able to procure a line at formal financial institutions”.

The deal is part of the bank’s ambitions to tap into the “non-served and underserved markets” which in turn it believes “have great job creation potential”.

The Economic Times reports that Bank of Baroda’s “micro-lending facilitation programme” will enable loan disbursements between INR 100,000 ($1,560) to INR 2.5 million ($39,000).

Under this alliance, working capital will be offered to over 225,000 sellers on the platform at interest rates of between 10.45%-11.5% within a span of three to five days, according to The Economic Times.

This development comes on top of Amazon’s seller loan programme, launched two years ago, which enables loans for sellers between INR 500,000 ($7,800) and INR 20 million ($312,000).

“We have been testing this initiative with Bank of Baroda for the last two to three months and currently have 100 sellers using this facility. The facility, however, will be open to all sellers on Amazon’s platform, including those who are present on other e-commerce platforms too,” says Gopal Pillai, director and GM, seller services, Amazon India.

On its part, Bank of Baroda expects the programme to achieve a 20% penetration rate amongst sellers on the platform over the next one year.

“This first year is the testing phase for us. If it takes off as planned, loans to e-commerce could see a potential of adding INR 8 trillion ($124.8 million) INR 10 trillion ($156 million) to our loan book,” says PS Jayakumar, MD and CEO, Bank of Baroda.

Jayakumar doesn’t give any explanations or timeframes as to how such figures could be obtained.

The Economic Times adds that the loans will be granted with an overdraft facility for repayment so that sellers can have flexibility to expand their business and pay the interest only when the money is being disbursed unlike an EMI facility. With 2,500 sellers being added on the platform every week ahead of the sale period, Amazon expects the lending programme to gain significant traction during the festive season.