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GST could help banks enhance credit monitoring

GST could help banks enhance credit monitoring
The new goods and services tax regime is bringing some unintended benefits for banks.

Many lenders, including DCB Bank, ICICI BankBSE -0.15 % and Axis BankBSE 0.52 %, are now offering companies the option of filing their monthly GST returns through their website.

This will help banks enhance their credit appraisal systems, keep track of corporate invoices and cash flows, and also get access to new clients by tapping their suppliers.

This service offered by banks is particularly useful for small and medium enterprises (SMEs) that are intimidated by the new GST regime but are comfortable with internet banking.

“Our site helps customers create an invoice and reconcile their accounts,” said Praveen Kutty, president for retail and SME banking at DCB Bank. “Our expectation is that customers using our site to fill their monthly returns will eventually make ours their primary bank account. It also enhances our ability to give loans, monitor cash flows and also will help us get access to their suppliers.” He said.

DCB has 5 lakh customers, 90% of which are self-employed. Axis Bank has also allowed its customers to file their returns through its website.

“This is an additional service, customers still need help to file returns,” said Jairam Sridharan, chief financial officer at Axis Bank. “This service will gain traction only when they are comfortable with filing returns. It remains to be seen as to how much it enhances credit appraisals,” he said.

“But there are no free lunches nowadays, so banks may either charge their customers or ensure some kind of a minimum balance to offer this service,” Sridharan said, adding that Axis Bank plans to open up this facility for noncustomers in a few months’ time.

DCB Bank charges Rs 250 per month per GST identification number (GSTIN) to fill their monthly returns for firms with average current account balance of up to Rs 50,000. Each state has a different GSTIN. Firms with higher balance can use GSTIN more frequently and at a lower cost according to DCB.

Analysts said banks will look to package this new GST service along with other corporate services to get the maximum benefit.

“Banks are under constant pressure to weed out non-KYC compliant accounts,” said MS Mani partner at Deloitte. “This (service) will help them to detect these because clients that are regular in filing returns are likely to be KYC compliant,” he said.

The Economic Times, New Delhi, 25th August 2017

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