SBI advises Snapdeal sellers to cut outstanding loans

As the consolidation rumour is rife in the market, India’s third largest ecommerce marketplace Snapdeal’s sellers are facing the wrath of SBI to reduce their outstanding loans above their drawing power.

According to SBI Chief General Manager (SME) G K Kansal, the bank has sent advisories to not more than three-digit number of sellers, who are coming under Snapdeal’s capital assist programme.

“We have asked the sellers to reduce their outstanding loans above their drawing power. SBI reviews the sales position of the sellers every quarter and asks them to reduce their outstanding loans if their sales take a dip in this period,” he said.

Kansal also pointed out that as the sales comes down, the drawing power of sellers also comes down automatically. Snapdeal had launched the capital-assist programme to make credit available for sellers in 2014, through a network of about 27 banks and financial institutions, including SBI, Axis Bank, Tata Capital and Reliance Capital.

SBI issued this advisory following a letter written by the All India Online Vendors Association (AIOVA) to Union Commerce Minister Nirmala Sitharaman, raising fears that Snapdeal may default on payments to the sellers.

AIOVA official finds that at any given month, Snapdeal holds Rs 300-400 crore in the form of outstanding dues and goods in transit or refunds.

Citing its dwindling transaction flow, Axis Bank also issued notices earlier this month to some Snapdeal sellers for immediate repayment of outstanding loans and withdrawing unavailed credit.

Besides slow growth and mounting losses, Snapdeal is also facing a falling market share, and an exodus of senior executives in recent months. There is also rumour that the company is looking for a merger with Flipkart or Paytm.