SIDBI said in a tweet that a rigourous process was followed for shortlisting and selection of capitaworld.com.
On November 2, Prime Minister Narendra Modi unveiled a quick loan approval scheme for medium and small enterprises looking to borrow up to Rs 1 crore. Packaged as a Diwali gift for mid-sized businesses still coming to terms with the Goods & Services Tax (GST), it underlined the advantages of the new tax system.
Owners of small businesses, upbeat on this new loan window to address their liquidity issues, logged on to the platform to log in their applications. On completing the process, many got spooked by confirmation mails coming from a private domain: capitaworld.com.
Fears over data privacy — the platform requires GST log in details, KYC documents, bank statements, business ownership details, information about directors, income tax returns and other personal particulars for processing applications — had many applicants and prospective applicants worried. Why should a private enterprise have access to their data? How can they be sure the information won’t be misused? These were the questions top of the mind for the small business community.
A little research revealed that Ahmedabad-based CapitaWorld was reportedly born out of the vision of Jinand Shah, a young CA and CFA, Aviruk Chakraborty, a budding techie (who isn’t listed among the management team any more) and Vinod Modha, a seasoned CA with links with several business houses. The venture commenced operations in 2017 and has been working with NBFCs to speed up their credit assessment process through use of algorithmic analytics for a fee.
The questions this raised were around the capacity of the fledgling entity to manage the national loan assessment process, the privacy of data, the reason for such an exclusive arrangement (with the government batting for a private platform) and the revenues accruing to the platform for this monopoly service.
Every applicant requires to pay a fee of Rs 1,000.
Does all of this go to CapitaWorld? To give you a sense, for just one lakh applications the fee would amount to Rs 10 crore. India is estimated to have over 36 million MSMEs (c), though a large number are unregistered, and that offers a context of the scale.
What The Government Says
The growing concerns started spreading through social media among small businessmen and to get to the core of the matter, CNBC-TV18 checked with sources in the government on whether these fears were legitimate.
The sources pointed out that CapitaWorld was majority (56 percent) owned by public sector institutions and banks (SIDBI, State Bank of India and Bank of Baroda), and that there was a plan to increase the stake to 76 percent in due course. They also looked to allay fears around data privacy saying that no “third-party” data is stored on the platform.
Responding to privacy concerns, SIDBI said in a tweet that a rigourous process was followed for shortlisting and selection of the platform and capitaworld including third party validations and oversight.
a rigourous process was followed for shortlisting and selection of the platform and capitaworld including third party validations and oversight. @SBIChairman @rkumar1958 @pnbindia @SBIofficial @MyIndianBank @VijayaBankIndia @bankofbaroda
— Small Industries Development Bank of India (@sidbiofficial) November 6, 2018
The company capitaworld owned and controlled by sidbi and 5 PSBs. 4 out of 7 directors are public sector shareholders nominee. @SBIChairman@rkumar1958@pnbindia@SBIofficial@MyIndianBank@VijayaBankIndia@bankofbaroda— Small Industries Development Bank of India (@sidbiofficial) November 6, 2018
While the public institutional shareholding is comforting, there still remain many unanswered questions around the process of selection of CapitaWorld, its credentials, revenue model, privacy and security standards. Clearly, the government will need to be more transparent to allay the concerns of prospective borrowers and reinfuse confidence in the platform.