Digitisation of processes allows industry to achieve better control of their credit facilities, reduce fees and speed up the application process, enabling them to grow transaction volumes without the requirement for additional credit, said the Confederation of Indian Industry (CII).
CII has advocated for increased digitisation of trade processing to enhance ease of doing business. A digital ecosystem will benefit industry and SME lending as well as Trade Finance.
“Current process of Trade Finance which is Paper-Denominated, sometimes takes weeks to get approval from banks and is expensive, unpredictable and inefficient. Using end to end (E2E) digital documents would make the process quick, cost effective and predictable”, said Mr. Chandrajit Banerjee, Director General, CII.
Indian businesses need access to a streamlined import / export process along with a cost-effective trade processing infrastructure. A technology enabled, centralised system will help simplify the way that various government departments and agencies interact with importers / exporters. The trade process currently involves a number of entities as well as multiple physical documents. This leads to a higher turn-around time, higher working capital costs including increased cost of processing and importantly, adversely affects the ease of doing business. Going completely digital requires significant infrastructure investment to get everyone connected.
CII has proposed a 4-step process to digitize trade financing. To start with, there is a need to digitise the trade process workflow, i.e. all documents to be digitally uploaded into workflow, while exploring digital lockers as a way to share documents and simultaneously moving towards digital approvals and signatures. “Digitising the trade process workflow can lead to a significant improvement in productivity by eliminating paper through advanced digital solutions such as ePresentation as well as digital approvals and signatures. It can also help facilitate real time visibility to global trade positions and transactions through image retrieval and customised reporting” said Mr. Banerjee.
The second step is to streamline (digitise) post trade documentation by creating linkages between Export Data Processing and Monitoring System (EDPMS), Import Data Processing and Monitoring System (IDPMS) and e- Bank Realisation Certificate (eBRC) to allow seamless data flow (currently banks upload data separately on eBRC) while using existing data in remittance request letters/online application and eliminating A2 forms.
The third step is to digitise document exchange for inland Letter of Credits (LC), currently inland LC documentation is physical, with turnaround time of ~5-7 days. Digitising the documentation process by enhancing the existing platform for inland Letter of Credit (LC) for supporting digital document presentation and exchange could reduce inland LC settlement to a single day.
The final step would be to Launch digital Bank Guarantee (BG) platform, building a digital platform/use of technology e.g. block chain for Bank Guarantees would enable a simplified Bank Guarantee issuance process including online payment of stamp duty and thereby doing away with physical guarantees/stamp paper resulting in improved turn-around time and reducing the risk of fraudulent documents.
It was also highlighted that usage of Trade Receivables Discounting System (TReDS) platforms for bill discounting with inter-linkages to GSTN to significantly ease flow of credit to MSME.
CII indicated that proposed digitization of trade, usage of TReDS and integration with GSTN would provide significant visibility of receivables and trade to lenders and assist in better credit assessment thereby helping lenders in taking more informed credit decisions.
Speaking on the need for enhanced digitisation in trade processing, Ms. Shikha Sharma, Chairperson, CII National Committee on Banking said, “A fully digital, end to end trade environment will impact ease of doing business in India by leaps and bounds. There currently exist many inefficiencies in the trade process, which could all be significantly optimized by passing appropriate regulations to facilitate digital trade processing”