Report Overview

The Indian government’s favorable and supportive initiatives and growing e-commerce and the digital economy and are projected to propel the expansion of India Supply Chain Finance Market during the forecast period between 2023 and 2029.

India Supply Chain Finance Market - Industry Trends & Forecast Report, 2029

India supply chain finance market size is expected at a CAGR of 8.42% during the forecast period between 2023 and 2029. Major growth drivers for India supply chain finance market include the increasing demand for working capital financing and growing adoption of digital technologies. As Indian businesses often face challenges with long payment terms and delayed payments, which can have a significant impact on their cash flow. Supply chain finance provides a solution to these challenges by providing businesses with access to faster payments and lower-cost funding. Also, digital platforms and tools are making it easier for businesses to manage their supply chain finance operations, such as invoice discounting, purchase order financing, and supplier financing. Another major driver, the Indian government has been promoting the adoption of supply chain finance through various initiatives, such as the Trade Receivables Discounting System (TReDS). TReDS is an online platform that facilitates the financing of invoices raised by MSMEs and has been instrumental in improving the cash flow of these businesses. These factors are expected to fuel the expansion of supply chain finance market across India during the forecast period.

India Supply Chain Finance Market– Overview

The supply chain finance market in India is growing rapidly as more companies recognize the benefits of this financing method. Supply chain finance, also known as supplier finance or reverse factoring, is a financial solution that allows businesses to optimize their cash flow by leveraging their supply chain relationships. In India, supply chain finance is primarily driven by the need for working capital financing. Indian companies face significant challenges in managing their cash flow due to long payment terms, delayed payments, and an excessive cost of credit. Supply chain finance can help alleviate these issues by providing access to lower-cost funding and faster payment processing. The Indian government has also been promoting the adoption of supply chain finance through initiatives such as the Trade Receivables Discounting System (TReDS), which is an online platform that facilitates the financing of invoices raised by MSMEs (Micro, Small and Medium Enterprises). The TReDS platform has been instrumental in improving the cash flow of MSMEs by providing them with access to low-cost funding and quicker payments.

India Supply Chain Finance Market

Growth Drivers

‘Make in India’ Initiatives Create Favorable Environment for Supply Chain Finance

The ‘Make in India’ initiative is expected to create a favorable environment for the supply chain finance market in India, as it aims to promote manufacturing and increase domestic production. The initiative is designed to encourage businesses to manufacture their products in India, which is expected to increase the demand for raw materials, components, and other inputs. This, in turn, is likely to drive the growth of the supply chain finance market as businesses seek to optimize their working capital and manage their cash flow more efficiently. In addition, the Make in India initiative is expected to attract foreign investment into the country, which could further boost the demand for supply chain finance solutions. Foreign investors may require financing to manage their supply chain operations in India, and supply chain finance solutions can provide them with access to the funding they need to optimize their working capital and manage their cash flow.

Restraints

Limited Access to Credit and Collateral Requirements

The limited access to credit and collateral requirements can be a significant challenge for SMEs in obtaining financing, and this can hinder the growth of the supply chain finance market in India. Many SMEs in India struggle to access financing due to a lack of credit history, limited financial resources, and insufficient collateral to secure loans. This can make it difficult for them to take advantage of supply chain finance solutions that can help them optimize their working capital and improve their cash flow. Furthermore, several traditional lenders may be hesitant to provide financing to SMEs, as they may perceive them as high-risk borrowers. This can limit the availability of financing options for SMEs and make it more challenging for them to access the funds they need to grow their business.

Impact of COVID-19 on India Supply Chain Finance Market

COVID-19 had a detrimental impact on the supply chain finance market in India. The lockdowns and disruptions to supply chains resulted in delayed payments, reduced cash flow, and increased working capital requirements for many businesses, particularly SMEs. It increased the demand for supply chain finance solutions that can help businesses manage their cash flow and optimize their working capital. Simultaneously, the pandemic also led to a tightening of credit conditions, making it more difficult for businesses to access financing. As a result, many businesses are turning to supply chain finance solutions as an alternative to traditional bank loans. The pandemic, on the other hand, has also accelerated the adoption of digital solutions for supply chain finance, as businesses have been forced to move their operations online. It has led to the growth of digital platforms such as the Trade Receivables Discounting System (TReDS), which provides SMEs with access to financing options that are more flexible and accessible than traditional bank loans.

India Supply Chain Finance Market

Segmental Coverage

India Supply Chain Finance Market – By Offerings

By offerings, India supply chain finance market is divided into Export & Import Bills, Letter of Credit, Performance Bonds, and Shipping Guarantees segments. The export & import bills segment held the highest market share in 2022 and is projected to maintain its dominance during the forecast period. Supply chain finance is a critical component of international trade as it facilitates cross-border transactions between buyers and sellers. Exporters and importers often face financing gaps due to the time lag between the shipment of goods and receipt of payment, which can lead to cash flow issues. Supply chain finance solutions such as export and import bills financing help bridge this gap by providing working capital to businesses to fund their operations. India is one of the world's largest exporters and importers of goods, and this high volume of transactions creates a large demand for supply chain finance solutions. The export and import bills segment caters to the financing needs of a wide range of businesses across different sectors, including manufacturing, agriculture, and services.

India Supply Chain Finance Market – By Provider

By provider, India supply chain finance market is bifurcated into Banks and Trade Finance House segments. The banks segment holds a higher share in the India supply chain finance market due to their established presence in the financial market, enabling them to offer a range of supply chain finance solutions. Banks have established relationships with their customers, allowing them to provide customized solutions tailored to specific needs. They offer a wide range of products, including export and import financing, accounts receivable financing, and inventory financing, catering to diverse financing needs of businesses. Banks in India have actively adopted technology to improve their supply chain finance operations, and the supportive regulatory environment by the Reserve Bank of India has encouraged banks to offer supply chain finance solutions to their clients.

India Supply Chain Finance Market – By Application

By application, India supply chain finance market is bifurcated into Domestic and International segments. The domestic segment is expected to dominate the India supply chain finance market due to several factors. The growth in domestic trade, particularly in sectors such as manufacturing, retail, and agriculture, has led to an increase in demand for supply chain finance solutions. Furthermore, the Indian government's efforts to improve the ease of doing business in the country have increased the number of startups and SMEs, which are driving domestic trade growth and require supply chain finance solutions. Compared to cross-border transactions, domestic trade transactions are considered lower risk, making domestic supply chain finance solutions more attractive to businesses. Additionally, the Reserve Bank of India's supportive regulatory environment, such as allowing banks to use electronic channels to deliver supply chain finance services and introducing the TReDS platform to enable SMEs to access finance at competitive rates, is expected to encourage the growth of domestic supply chain finance in India.

India Supply Chain Finance Market – By End User

Based on end user, India supply chain finance market is split into Large Enterprises and Small and Medium-sized Enterprises (SMEs) segments. The SMEs segment holds a higher market share due to their large numbers and high credit risk. With limited access to credit, SMEs are turning to supply chain finance solutions to manage their working capital requirements and cash flow. The Indian government's initiatives to support SME growth, such as the Make in India program and the TReDS platform, have further fueled the demand for supply chain finance solutions in this segment. Additionally, as SMEs become more aware of the benefits of supply chain finance solutions, their adoption of these solutions is expected to continue to drive growth in the SME segment of India's supply chain finance market.

India Supply Chain Finance Market – By Region

India supply chain finance market by region is divided into West India, South India, North India, and East India. The West India dominates India supply chain market. Major cities in India, such as Mumbai, Delhi, Bangalore, and Chennai, have emerged as key hubs for supply chain finance activities, due to their strong financial infrastructure and presence of major banks and financial institutions. Mumbai, in particular, is considered as one of the leading cities in India for supply chain finance, as it is home to the headquarters of several major banks and financial institutions, as well as many large corporations that have significant supply chain operations. The city has a well-established financial ecosystem, which has enabled the growth of supply chain finance activities. Hence, West India is expected to continue its dominance in India supply finance market during the forecast period. In recent years, there has been an increase in the adoption of supply chain finance solutions by SMEs in India, which has contributed to the growth of the industry in various parts of the country. With the government's focus on promoting digitalization and financial inclusion, the supply chain finance market in India is expected to continue to grow in the coming years, with more companies adopting innovative financing solutions to improve their supply chain operations.

Competitive Landscape

Major players operating in India supply chain finance market include Axis Bank Limited, State Bank of India, ICICI Bank Limited, HDFC Bank Limited, Yes Bank Limited, Kotak Mahindra Bank Limited, Standard Chartered Bank Limited, DBS Bank India Limited, IndusInd Bank Limited, IDFC First Bank Limited, Punjab National Bank, Bank of Baroda, Federal Bank Limited, Canara Bank, and Indian Bank. To further enhance their market share, these companies employ various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches.

Scope of the Report

By Offerings

• Export and Import Bills

• Letter of Credit

• Performance Bonds

• Shipping Guarantees

By Provider

• Banks

• Trade Finance House

By Application

• Domestic

• International

By End User

• Large Enterprises

• Small and Medium-sized Enterprises (SMEs)

By Region

• North India

• South India

• East India

• West India